Article

10 Golden Rules of Investing

Nutan Gupta

27 Mar 2018

One of the world's richest men and the greatest investor of our times, Warren Buffet has many remarkable stories surrounding him. In 2006, Warren Buffet donated 85% of his then 44 billion US dollars wealth to charity. None of us would have the spine to do that. However, Warren Buffet did that and re-attained his position among the richest men in the world.

We all have dreams and aspirations; for some, it may be having a place to call theirs while for some it may be driving their luxury car to work every morning. However, these dreams come crashing down when you realize that you don't have the funds to fulfill them and with your limited income, you probably won't even have the required amount after 20 years. Luckily, these days there is a solution to everything. Investing your money in different instruments is a sure shot way of not just increasing your income but also increasing it exponentially. However, smart investing is important for your money to grow exponentially. 

Here are a few points to aid you in investing smartly:

Money Investing Rules

1) Be clear about financial goals

Before investing, always be clear about what you want from your investment and how much return you expect from it.

2) Know your net worth

It is always important to calculate the net assets and liabilities a person has before beginning with the investment process. It will be easier for you invest your money wisely if you are knowledgeable about current investments.

3) Proper research

Proper research is crucial; avoid investing in anything unless you have adequate knowledge about the subject.

4) Never try and time the market

In simpler words, never try to guess which way the stock market will go. Invest today and widen your investment horizon.

5) Always invest in businesses you understand

If you are new to investing, it is always safe to start off by investing in the sectors with which you are familiar. This will help you make sound investment decisions.

6) Diversify your portfolio

Spread your risk across different asset classes. Invest in different types of financial instruments so that even if you suffer a loss in one, it will be compensated by gains in another.

7) Review your portfolio

Always track the performance of your portfolio at regular intervals to check the performance of your investments. Also, an analysis may be required may be required on special occasions like marriage, etc.

8) Factor in inflation when calculating returns

Very few investors comprehend the influence of inflation on their investments. Factor in inflation to know the real value of your income and investments

9) Be prepared for contingencies

Always ensure that a few investments are in the liquid state; these can be withdrawn at short notice to meet any emergencies. Don't lock in all your funds for a long time.

10) Emotions should not dictate investment decisions

Never get carried away by emotions while making investment decisions. Be realistic and rational when making such decisions related to investment. Always be realistic about your expectations. Don't build castles in the sky; don't base your financial goals on unrealistic expectations.

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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 

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10 Golden Rules of Investing

Nutan Gupta

27 Mar 2018

One of the world's richest men and the greatest investor of our times, Warren Buffet has many remarkable stories surrounding him. In 2006, Warren Buffet donated 85% of his then 44 billion US dollars wealth to charity. None of us would have the spine to do that. However, Warren Buffet did that and re-attained his position among the richest men in the world.

We all have dreams and aspirations; for some, it may be having a place to call theirs while for some it may be driving their luxury car to work every morning. However, these dreams come crashing down when you realize that you don't have the funds to fulfill them and with your limited income, you probably won't even have the required amount after 20 years. Luckily, these days there is a solution to everything. Investing your money in different instruments is a sure shot way of not just increasing your income but also increasing it exponentially. However, smart investing is important for your money to grow exponentially. 

Here are a few points to aid you in investing smartly:

Money Investing Rules

1) Be clear about financial goals

Before investing, always be clear about what you want from your investment and how much return you expect from it.

2) Know your net worth

It is always important to calculate the net assets and liabilities a person has before beginning with the investment process. It will be easier for you invest your money wisely if you are knowledgeable about current investments.

3) Proper research

Proper research is crucial; avoid investing in anything unless you have adequate knowledge about the subject.

4) Never try and time the market

In simpler words, never try to guess which way the stock market will go. Invest today and widen your investment horizon.

5) Always invest in businesses you understand

If you are new to investing, it is always safe to start off by investing in the sectors with which you are familiar. This will help you make sound investment decisions.

6) Diversify your portfolio

Spread your risk across different asset classes. Invest in different types of financial instruments so that even if you suffer a loss in one, it will be compensated by gains in another.

7) Review your portfolio

Always track the performance of your portfolio at regular intervals to check the performance of your investments. Also, an analysis may be required may be required on special occasions like marriage, etc.

8) Factor in inflation when calculating returns

Very few investors comprehend the influence of inflation on their investments. Factor in inflation to know the real value of your income and investments

9) Be prepared for contingencies

Always ensure that a few investments are in the liquid state; these can be withdrawn at short notice to meet any emergencies. Don't lock in all your funds for a long time.

10) Emotions should not dictate investment decisions

Never get carried away by emotions while making investment decisions. Be realistic and rational when making such decisions related to investment. Always be realistic about your expectations. Don't build castles in the sky; don't base your financial goals on unrealistic expectations.