Investing seems complicated, where do I start?3 min read
Investing at first glance may seem intimidating to those without any acquaintance with the subject. In fact, a large number of people refrain from investing due to their fear of losing money. But in reality, investing is not half as complicated as we perceive it to be.
The fact that investing is for everyone is evidence of its simplicity. If you have never invested before, we will help you understand how simple it is to make your very first investment.
To begin with, answer three important questions. Answers to these will form the base of your investing decisions.
1. What are your Financial Goals?
Understand what you want to invest towards and choose the appropriate funds to invest in accordingly. You can pick from these broad categories of funds to meet your goals.
- If your goal is to build wealth over a long period of time, Equity Funds could be a good bet for you. These funds are known for long term wealth accumulation. Investment in equity funds comes with a relatively higher amount of risk. So, before investing understand the risk associated with your investment.
- Many of us seek to maximize our savings, and if you are looking to maximize your tax saving then ELSS funds are for you. Investing in ELSS funds or Equity Linked Savings Scheme not only creates wealth for you but offers the dual benefit of tax-saving too.
- There are many of us who wish to have some liquid cash for emergencies and the likes. Instead of opting for a savings bank account or a fixed deposit account, you may want to explore investing in liquid funds that offer higher interest rates than banks and are also easily accessible in times of need.
2. How much risk can you take?
It is important to know how much risk you can afford to take. Mutual fund investments are subject to market risk but it doesn’t mean that you will lose all your hard-earned money. You simply need to know your risk tolerance and invest accordingly.
- If you are willing to take higher risks to get higher returns, you will be categorized as an aggressive investor. Aggressive investors invest with the aim of maximizing their returns at the expense of exposure to greater risk.
- On the contrary, if you are an investor who is simply looking to safely park their funds for a lower return, you’d be categorized as a conservative investor.
3. How long do you wish to stay invested?
This question answers what your investment horizon is, or simply the duration for which you wish to stay invested. It is an important question because it decides how long your money will be invested. Depending on your goals, it will fall in one of two categories:
- Short-term investment: This spans a period of 1 to 3 years and the investment earns low returns. It is a good option of investment for those who have short term goals.
- Long-term investment: If you wish to stay invested for longer than 5 years you will fall under this category. Mutual funds with time earn higher returns and thus if you want to maximize your returns it is recommended that you stay invested for the longer term.
Answer to these three questions will help simplify your investment objective and your investment plan. For more details, you may explore the Investment Packs on the Paytm Money App. Each pack contains 3–5 funds designed to suit your risk profile. You may also make use of the free risk assessment tool on the app to determine your risk tolerance. Investing does not need to be complicated and if it does, just ask yourself these 3 questions and we hope you get the clarity needed to make your very first investment.
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance is not an indicator of future returns.