Investment: Guide for beginners

Welcome back to the article series of 'personal finance guide' for beginners. In first article we saw ideal distribution of Monthly Income Expense book. While in second, we discussed about pre-investment checks before you really get into any kind of investments. If you have gone through both of them, you are well prepared for this one.

Depending upon what kind of investor you are, you can think of balancing your investments into two major areas -

1. Traditional, low risk & safe investments instruments.

2. High risk, high return investments instruments.

As discussed in first article. the safe instruments consists of traditional (short duration) Bank RD, FD as well as modern day's popular liquid funds, debt funds, etc where some percentage return on your investment is guaranteed. Also you don't need to invest much time in research or to analyse them as these instruments has some baking from authentic entities such as the bank itself, the government, big corporate companies, etc.

To start with bank RD/FD, you can use the mobile app/internet banking facility of the bank, in which you already have your savings account. This way you can track its progress time to time via same app or internet banking.

For Mutual funds investments, you can directly go to the AMC's (Asset Management Company) website and register for an SIP (Systematic Investment Plan) or you can sign-up with well known platforms, such as PaytmMoney, Groww, etc. For people in 'regular income' category, SIP is a good choice. The platforms mentioned above also provides some good ad-on utilities such as quick KYC process, fund recommendations, easy tracking, etc. But do remember, only "You" are responsible for every investment decision you make and you are the one who face its consequences. So do not make choices blindly.

As a beginner you must start with one of these and observe how it performs for at least for six months of time. (Till maturity in case of RD & FD) This will help you to build some kind of confidence in the concept of 'investing' and prepare your mindset. Why such a long wait? There is a reason behind it. Somewhere I read, it's not just the investment instrument which makes the investor rich, but the mindset behind, plays its role as well.

So unless you work hard on the foundation of your investment empire, you can't enjoy the view from the top mindfully. By now you would have understood why we've been talking about money habits, financial-discipline and pre-investment checks till now; rather than directly jumping to the topic.

Once you are comfortable enough with these and your 'risk appetite' allows you to go ahead with high risk, high return type of investments, you can think of below instruments:

1. Equity Mutual Funds, Tax saver Mutual fund schemes (ELSS)

2. Company shares

3. Gold & Silver

4. Real estate

But do remember, these types of investments demands some kind of 'lock-in' period to allow your invested money grow. If you invest money in any of these, you might have to wait for years and years to get a good, handsome return. Believe me, those who have managed to do it in past, are enjoying bucketful of rewards today (in most of the cases). But here is a catch; such investments would need certain amount of personal efforts for "research and analysis" from you. How to do it? Again, start investing time to increase your financial knowledge. Read books and articles related to this topic, follow social media handles which gives authentic information about the sector, and so on.

Now you know what type of investment options you have and your risk appetite calculator told you how you should distribute your money among them. Now is the time you should get demonstration of how much money you can make by following this model. So that you can confirm whether it meets your financial goals in specific time or not. Below is the document to help you.

Monthly_Salary_Planning_v1.0.2_Investmen

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This is an extension to the document shared in Monthly Income Expense Guide. You can enter your salary and try different combinations of percentage you can allot to different types of investments categories. In the results, you'll see how much total asset value you'll have after: 1 year - in case of short term instruments and 10-15 years - in case of long term instruments. (SIP calculator link is given inside the document to calculate the mutual fund returns)

Note: Remember, the boxes given in the percentage section are smart and will allocate amount if the total allocation is sufficient for that instrument. e.g. If investment amount is less than 15 thousand, 'real estate' section will have zero rs/month allocated to it. (To meet practicality in the planning)

Till here, we discussed about the 'funds allocation' and 'the start' of investments. Hope you enjoyed it and will make use of the utility provided to measure your investment journey.

In next article we'll deep dive into the 'high risk high return' type and identify some best practices and hacks to start with. So stay tuned. Happy Investing!!

Book Recommendations:

One Up On Wall Street - by Peter Lynch

One Up On Wall Street - by Peter Lynch [Kindle edition]