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How to Start Investing Money for the First Time?

It’s time to start investing once you’ve figured out how to budget your monthly costs and save at least some money for an emergency fund. Determining what to invest in and how much is the challenging part. You will have numerous questions as a complete beginner to the world of investing. 

You may need to know how to invest money or the amount required for investing. In the world of investing, active and passive strategies are the two primary factions. Both approaches have merit as long as you keep an eye on the big picture and don’t only consider the present moment. Nevertheless, your way of life, resources, risk tolerance, and interests may influence your preference for one type over another.

You might believe that you need a significant amount of money to establish a portfolio. But that is a misconception, as you can start investing with as little as Rs. 100. You just need to know how to invest money in proper financial products. The most important component is ensuring you are financially prepared to invest and regularly make investments over time. 

Here is the guidance to start investing money:

  • Start investing as early as possible- One of the best ways to get good returns on your money is to invest when you’re young. Your investment returns can generate their own returns. It’s now simpler than ever to invest with smaller sums of cash. There are several assets readily available for low amounts, including mutual funds, exchange-traded funds, and index funds.
  • Decide how much to invest- Your financial status, your investment goal, and the deadline for achieving it all will determine how much you should invest. Retirement is a typical investment objective. As a general rule, one should invest 10% to 15% of their annual income towards retirement. Undoubtedly, that sounds unachievable right now, but you may start small and build up to it over time.
  • Pick an investment strategy- Your investing strategy is based on the amount of money you need to save to attain your goals and your time frame. Almost all of your assets can be put in stocks if you want to retire within 20 years. However, selecting individual companies can be difficult and time-consuming. For this reason, for the majority of investors, the ideal approach to invest in stocks is through inexpensive stock mutual funds, index funds, or ETFs. Keeping your money secure in an online savings account or low-risk investing portfolio is preferable due to the danger associated with equities. This is applicable if you’re saving for a short-term objective and will need the money in less than five years.

Understand your investment options:

Every investment involves some risk, so it’s critical to comprehend the risk level and whether or not it aligns with your goals. For those who are just starting out, the most common investments include the following:

  1. Fixed deposit- You deposit a lump sum into a fixed deposit for a predetermined period of time at an agreed interest rate. The interest rate is predetermined and is based on how long you choose to keep the deposit. The returns on an FD are fixed when the account is opened, unlike market-led investments, where returns change over time. You will continue to earn the interest set at the beginning even if interest rates decline after you open a fixed deposit. You can create fixed deposit accounts in post offices or financial institutions like Bajaj Finserv. Postal FD interest rates stay around 6%.
  2. Stocks- A stock is a unit of ownership in one particular business. Equities are another name for stocks. Stocks are bought for a share price which depends on the company. It is advised to buy stocks through mutual funds.
  3. Bonds- A bond is effectively a loan to a business or government agency that promises to repay you over a specified period of time. You receive interest in the interim. Bonds are generally less dangerous than equities because you know exactly when and how much you will be reimbursed for. However, bonds only make up a modest portion of a long-term investment portfolio because of their poor long-term returns.
  4. Mutual funds- A mutual fund is a collection of investments that have been bundled. Investors can purchase several stocks and bonds through mutual funds in a single transaction. This saves them the time and effort of choosing individual securities. Mutual funds are inherently more diversified than individual equities, making them generally less risky.
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