Beginner’s guide to investing

Starting investing very early in life say when you get your first step is crucial to building a retirement corpus early on in life.

As youngsters either we spend a lot of money on things that don’t help us like alcohol, smoke and unnecessary travels or we are too chicken-shit to start investing. We haven’t got the first clue on what a good investment is, the returns and other associated things.

The first problem is the financial jargon that revolves around the world of investment. For a beginner who has no idea of the market and changes opinion according to every direction the wind flow, terms like PE ratio, earnings other words would just fly off their brains. They think it’s better to avoid these nerve wracking terms and shift focus to as things were, maybe buy mutual funds from an agent and call it a day. You only a few hours of research to find your way around the jargon and get clarity.

And even then you need not get particularly good at what this. A little bit of information and smart thinking on your part is often enough to make money investing.

If early on in your career you can wait and build a nest egg and stove away money for later there’s no particular reason you won’t succeed. You first need determination followed by hard work.

When you fall on hard times, facing a financial crunch it’s better to rely on borrowings from friends and family rather than touching the nest egg or going for a personal loan. The interest rates are high and if you’re squeezed in for a long period there’s not much hope. You may have to pay double. The best thing you can do is save and that’s the first lesson in investing.

Avoid these mistakes

Don’t invest in things you don’t understand or completely understand the things you’re getting into. Don’t follow suit doing things that your friends are doing or investing in. That’s no way to invest.
There are scores of factors like investment amount, lock-in periods and penalties. And before putting down your money ask the agent all questions, clarify everything and then purchase. It’s better not to buy from friends feeling they will never cheat you or misuse the trust you place on them. Anything can go wrong if you’re not wise about things.

There are hundreds of schemes popping up every single day. Not all of them are worth the paper they’re printed on. Investing money in schemes that offer unnaturally high returns for a low sum, zero risk and statements like that generally never materialize.

I don’t know of any schemes that can double money in 3 months or 6 months. That’s just the trick to pony up the maximum possible investment from unsuspecting investors and run for the hills.

Don’t fall for such dubious measures and lose out on hard earned money.

3.  Never invest by taking loans

Whether it’s a good real opportunity or a scheme that looks lucrative better avoid investing by taking on a loan. A loan is a liability that you’re better off without. And there’s always the possibility that the investment doesn’t give you the promised returns. In that case you’re stuck on the loan repayment. Wait longer and the interest increases.

Don’t buy stocks listening to random tips or messages about a stock going up. This is promoter play which often happens to get innocent victims lose their money. Speculation is better done without.

5.  Never put all your eggs in the same basket. This holds so true for investments. Don’t put all your corpus into one stock or one mutual fund scheme no matter how attractive it looks and how unreal the promised returns are. You will lose out.

Diversify what you invest and seed a lot of different instruments like debt equity, mutual funds , insurance, gold and ELSS