As we are moving through the new beginnings in 2021, the markets are still full of speculations and uncertainties.
Economic disruptions and slowdowns can grip any country across the globe and impact the social, political, financial, and emotional health of individuals and nations alike.
The journey of an investor is not an easy one and except for very few lucky ones, almost every investor experiences a journey full of ups and downs.
Fluctuations in the market, interest rate changes, and various twists and turns along the financial path can make you leave even the smartest investors overwhelmed, confused and many times even stressed.
It is true that the market can help you make a lot of money, but you can also lose a large share of your profits if you are tempted to invest randomly without having a proper plan and knowledge of the market.
A disciplined approach to investing is the first thing that one needs as an investor. In this article, we will discuss 10 things that every investor should know before getting started with investing his or her hard-earned money.
Just being well aware of the points mentioned below, can greatly help you keep your focus on the long term gains and plan your investment routes and channel better to achieve your financial goals in the best possible way.
So, let us get started with this list of some amazing points hoping that by the end we’ll have a better understanding of smart investing.
What Can You Do As An Investor?
It’s time to relook at your investment strategies. Here are some tips for investors to maneuver through current market conditions.
This is not necessarily strict financial advice, but just some points compiled with observations, analysis, and studies across the world to lead new or beginning investors in the right direction.
1. Get Ahead
This isn’t a rat race, but it definitely helps to begin early. Savings, after all, compound over time. Many people just keep on waiting for the right time to invest and others just make enough just by starting a few years before them.
Do not wait until you ‘settle down’ or ‘have a family’ to start thinking of investing. The sooner, the better.
So, explore available options in the market that suits your needs. Investment as simple as recurring deposits can help you maximize your monthly saving efforts.
2. Have a Goal
It’s time to get down to the details. If you are an investor looking for a healthy financial plan, you should have more than a ‘good retirement fund’ or ‘maybe-a-business-after-10-years’ plan.
Pinpoint your goals and work backward. Identify potential risks, analyze the time frame for those goals, and consider any other contingencies.
Ask questions. What is your fixed income? What are your assets? Another important thing.
Consider your age and ensure you factor that for your investment plan and goals. Without having goals, you would not be able to plan things in the right way to get the most out of your investment options.
3. Allocate Emergency Funds
There is always a need for emergency funds apart from our savings and investments. Make sure you have a separate emergency fund, of about 5 to 15% of your income, as part of your investment strategy.
These might come in handy in case of an unexpected disruption. Neglecting this might make you regret it later in the future during troublesome times.
4. Rule of 72
Remember the golden rule of 72. This rule will help you estimate how many years it will take for the rate of return to double. The years required to double is calculated as 72 divided by the rate of return on investment.
Why is this important? It will help you compare your investment strategies and show you which investment options will produce double the amount of return.
Rule 72 is a pretty deep concept if one would want to know in detail, if you are confused about this or want to have a brief understanding of it then a simple Google search about it will be more than enough to help find the right resources to learn more about it.
5. Be Aware
Now more than ever, you need to be aware of the market conditions and the options available for you to invest.
Newspapers, podcasts, blogs, and websites offer relevant information on investment strategies depending on your expertise level.
Make sure your eyes and ears are open to absorb well-researched and expert advice. You also need to be cautious and not overwhelm yourselves with an information barrage that will drown you.
Turn to reputed sources like The Economist, ET Money, Wall Street Journal, etc. You can also join some communities on Facebook on WhatsApp that share all about investments and the latest insights into the market.
The more you will keep yourself updated the better you can do with your investments.
6. Diversify Investments
Another thing this pandemic has highlighted is the volatility of the market. It has proven that you cannot simply invest in one asset and hope it will multiply, safely, surely, and securely.
There are several investment options like gold, corporate bonds, real estate, to name a few. This step will ensure that even if one of these assets fails, the other will keep appreciating.
7. Do not make emotional choices
A useful and most important tip for investors is to avoid making emotional choices. There will be times when the going gets tough, but it’s only the tough get going.
You need to develop a knack to handle a crisis, think rationally, not break under pressure, and be willing to see into the future and not just at the immediate situation at hand.
Also, you can skip believing everything that you see on the internet related to the latest insights and trust your own analyzing capability.
8. Invest in a range of domains
Tech companies are increasingly becoming a choice of investment. And there’s a reason for that.
Companies like Amazon, Facebook, and Netflix have proven that withstand the test of disruptions and that they will adapt to changing market needs.
However, other domains are underexplored when it comes to investment strategies. Food and beverage companies, along with healthcare companies, are another interesting choice.
The companies will continue to prosper as long there are people to serve, so why not give them a shot?
It is always suggested to have a diverse profile because the market doesn’t remain consistent for all the niches.
9. Resist the urge to spend
Despite the situation, there is no dearth of spending options. Everywhere around us, we see compelling stories of flamboyance that consider us to relook at our retirement or emergency fund.
It is important to resist that urge and decide what you need and what you want. Doing this will be a blunder, forcing you to make unwanted and unhealthy compromises later.
10. Hire an expert
If you are not an expert in handling your finances, take help. There are several accountants, managers, and financial planners who can help you manage your money for you.
While your classical economics knowledge may be great, these financial professionals can help you build profitable portfolios even when the markets are low.
While our physical and mental health takes precedence over everything, we must also start looking beyond safety and security and start looking at financial health for our collective well-being.
It is time to start looking at investing from home with a multitude of opportunities available in the market.
So, these were some things that every investor should know about. By following the points mentioned, you would see a great overall difference in your investment journey.
We hope that these things will help you grow your investment portfolio. If you are still having any queries you can share them in the comments and we would be happy to help you.
About The Author
Himanshu Sharma is a growth advisor at Lendbox which is one of the leading P2P lending companies in India. P2P lending is one of the best investment options in India.