4 best tips to invest in stocks
Created on 20 Apr 2019
Wraps up in 4 Min
Read by 3.1k people
Updated on 19 Oct 2019
Investing is a great option to grow your wealth just in case you have any doubts. However, most people only get partly benefitted from investing their money and are unable to grab the maximum benefits from their investment.
To grab the maximum out of your investments, you need to have the right investment plan in hand. Now, you must be wondering, ‘How does an investment plan help?’. An investment plan takes care of your key financial concerns and devises an investment strategy which revolves around your goals and disposable income that you are willing to invest.
An investment plan ensures the following:
- What is the amount of income that you are willing to invest each month?
- What are your financial goals?
- What percentage of liquidity may you need in the future?
- What is the amount of risk that you can afford?
- Finally, the most critical factor which is, ‘where should you invest?’
An important point that you must note over here is that financial plans cannot be copied from your extended families or friends. These plans are unique to each as they are designed to address the unique needs of each one of us. Moreover, the financial plans vary from regular job holders to freelancers based on their income pattern. Once you have a financial plan devised for you, then, it needs to be revised periodically as circumstances or preferences change with time.
So, let us see the key essentials required for investing money.
- . Figure out your income and expenses clearly
First and foremost thing before investing is to figure out the money that has to be paid as your living expenses, insurance, debts, etc. You also need to chalk out your total income from various sources such as salary, bonuses, freelance income, returns or profits from investments, etc. This will give you a clear picture of your savings which can be used for investment.
So, now you have a clear understanding of what is the amount of money that you are saving each month. You can comfortably choose a certain percentage of your savings to start investing.
- Clear your debts
To support our hectic lives, we often end up buying conveniences on personal loans such as car loan, house loan, educational loan, property loan, etc. Such debts can build up to form a huge financial corpus which is difficult to handle later. Thus, a piece of advice before starting to invest is that you must try to get rid of all your debts to get the maximum benefit out of investing.
There is another popular form of debt growing in India which is called as the credit card debt. In one of the recently published reports, Indians accounted for a total of 42100 crores of credit card debt in 2016.
If you still choose to invest with so many uncleared debts in your account, then, whatever returns or gains you get from your investments are only used for paying off debts. Financial stock or equity investments are known to get you a huge financial corpus that builds over a while. But, in this scenario, there is no scope of reinvesting the earned profits to let your money grow as expected.
So, instead of choosing to invest a portion of your money, it is better to use for debt clearance to minimize your interest and to clear off your debts at the earliest.
- Build a contingency fund: Life is highly unpredictable for all of us. You can be laid off from work, or could meet with an accident, or can suffer from some disease or the other, or may have to support your family with some unforeseeable circumstance coming up any time. Of course, you would need sufficient money to handle such emergencies in life.
If you depend on credit card facilities, then you would be totally debt struck with heavy loan interest levied by the banks on using credit cards beyond the specified limits. So, you need to build a good contingency fund in the form of a savings bank account where you deposit a certain sum of money each month to use it at the time of emergencies.
- Seek advice: Though you may find the financial world a bit jittery, yet, having a good investment plan helps you play absolutely safe and earn a lot of money. At this stage, it would be great to approach a reputed financial advisor who knows the market well. A financial advisor will help you narrow down on the right stocks or mutual fund options using his expertise and knowledge.
An investment advisor breaks your financial goals into smaller steps and helps you achieve each goal within your desired timeline. The only care that you must take is to make investments with the money that you save and not with the money that will anyways part with you for paying debts, loans, bills, etc. A financial expert charges you an initial value which is undoubtedly worth it provided the advisor is reliable.
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