Rules for Investing from scratch (for beginners)
We behave as we think. Since we think investing is a complex exercise, we feel it that way. But the basic principles are simple. Anyone can become a good investor just following simple and easy rules, and escape from nightmare. Kindly have a look at the rules for investment success below.
Begin with the PLAN: For your short-term goals you have to take risk, but make sure you’re taking appropriate risks. Invest money that is surplus and you can wait for 2-3 years with out any panic. What I will suggest is investing in long-term bonds. If you have already pressed the panic button by taking too much risk for short-term objectives, pull back now. Right now no one is in the position to predict the bottom of this market. GET OUT OF THIS MARKET BY CUTTING YOUR LOSSES and preserve the money for your future short-term goals. This is the time we got to focus on long-term financial goals and equities are the best.
Play Simple: Right now big head’s in the market suggest diversified equity fund or an index fund, if you are really looking for an equity exposure and for fixed income exposure floating-rate bond fund is the best. Of course, there are many other types of funds like Petro, MNC, Gilt, Fixed Maturity, Serial Plans etc in the market, but the risk factor are less as far as the diversified equity fund or an index fund are concern. Play simple by selecting diversified equity funds of well-established fund families. Equities prove to be the best performing long-term asset class. Stay away from wearied specialty and sector funds, if you have blood pleasure because these sector funds come with huge risk factors and you can take in your stride a 25% loss in a quarter.
Beware, you are in the illusion filled world don’t fall for the gimmicks, avoid and be away from the hot stocks and funds. It’s a kind of boomerang today top-performing fund or stock, can hit the bottom next year same day. Only thing constant in life is CHANGE.
Periodic investment is the best way. Invest periodically, that is every month investing the allocated small amount and is an amazing way to reduce the risk of investing. The periodic investment will safeguard you from the probability of buying when the market is on top. Ups and downs are the way of life as far as the market is concern and periodic investment is the only solution.
Buy and Hold: Brokers are getting richer and richer as far as the short-term trading is concern and beware income tax people appreciating this practice because they are also getting benefited. If you happen to meet anyone who claims to have made money through short-term trading, resist your temptation to listen any further and move on to a more productive conversation because it’s a corn.
Do lots and lots of research and always re-examine your risk.
