Investment: Now is the right time

We need to start our investments as early as possible. Now is the right time to start the investments if we are earning.

We should create a diversified portfolio to minimize the risk involved in investing. We can invest in Fixed deposits, recurring deposits, gold, government bonds, mutual funds and stock or any combinations to create wealth.

Once we have created a portfolio, it will start generating incomes in the forms of interests, dividends and capital appreciation. The financial portfolio will reach to a stage of it being working hard for us to cover our monthly expenses too.  

Investment: Debt funds

In mutual funds, we have the option to select equity fund, index fund, sectorial fund and debt fund.

Debt fund is the fund that invest bonds and non-existant convertible debentures (NCD). It is better to invest in a fund that invests in government bonds and NCD of high rated companies.

Some may feel it safe to start a SIP in a equity fund and later start a STP to a debt fund from the equity fund. 

Selecting the right funds become the backbone of the mutual funds investments.

Investment: An asset

Is investment an asset?
Yes,  if we are investing for a long time. If it is not consumed too early, our investments are the assets. Like land and house are hold for a long time.

Investments like shares, mutual funds, gold,  bonds, retirement savings are assets. These assets can be held for the longer time. The ownership of these assets can be transferred from generation to generation till they are sold to change the ownership.

These assets are such that if one does not own it,  another will own it.

So we must hold our investments as long as we can and enjoy the growth our assets. 

Investment: Patience

Once we have invested and set an investment goal, we must stick to our plan. Stopping a SIP and withdrawing an investment suddenly would not make us successful in investments.

Problem is not with the investment which will give the fixed return but with the investment which has uncertain return.

Investing is like planting a seed and watering it regularly. We must give it the required time to grow. This is really the hard work for the investors. Many investors fail in investment as they quit investing when they see the things are going as they have planned.

If we have planned well, selected well and invested or investing well, all we need is have patience. 

Investment: SIP & Lumpsum

We have two modes of investment.
1) SIP
2) Lumpsum

SIP or Systematic investment plan is investing a certain amount for a period of time. If we invest Rs. 1000 for 40 years @ 13%, we can expect the investment value above 1 crore. Here the invested amount is Rs. 480000.

Lumpsum is one time investment for a period of time. If we invest Rs. 100000 for 40 years @ 13%, our investments will grow above 1 Crore. Here the investment amount remains the same - Rs. 1 lakh.

In the investment type where the return is uncertain, SIP mode will be the best option to invest. ln mutual fund we can buy more units when the market is not performing well.

Investment: Sector preference

If we want to build our portfolio on the basis of sector, we need to consider the total weightage of the stocks in a particular sector.

Banking and financial services lead in Nifty 50, followed by energy and IT sectors. After selecting the sectors, we can build our portfolio considering the weightage of stocks in the particular sector. As for example HDFC bank leads the banking sector.

Invest in Market leaders. Invest in top 1, 2 or 3 companies in a particular sector.

Bank nifty is available in ETF to invest, if we are not able to decide where to put our money in Banking sector.

Investors should plan their portfolio in such a way that they need not worry about the selected stocks as long as the stocks remain the market leaders. 

Investment: First stock selection

In NSE & BSE,  we have a long list of listed companies. Nifty 50 is top 50 companies and Sensex is top 30 companies.

50 companies in Nifty 50 and 30 companies in Sensex contribute to the respective index according to their weightage. The stock with the most weightage becomes the main reason behind the rise or fall in the index.

We must select our first stock considering the weightage  in the index. Selecting from the top 5 or 10 companies based on their weightage is the better strategy than investing in a weak stock. 

Investment: Invest now

Once we have saved enough for our immediate requirement or emergency fund, we can start our investments.

If we start early and invest Rs. 2500 only every month for 40 years @ 9 %, we have invested Rs. 12 lakhs and the expected amount is Rs. 1,06,24,012. This is the wonder of compounding return.

If we find it difficult to invest Rs. 2500 initially, we can reduce the investment amount to  Rs. 1000 but keep the investment period and rate of return as 40 years and 9% respectively, the expected amount is over 42 lakhs. 

The above examples show we can start our investments with any amount. As our income grows,  we need to save more and increase our investments. 

Investment: Start early

We should start early in the matter of investment. Investment should start when we receive our first salary.

The process is simple. Save first to invest. If we start early, a SIP of a small amount for a long time is enough.

We can start a SIP in the mutual funds or shares. A weekly, monthly or quarterly or yearly SIP in mutual fund can be planned and a fixed amount will be debited from the bank account on a fixed date.

SIP in share is different as the price of share varies everytime and every day.

Finally, invest early to retire early.

Investment: Diversification

Do not put all the eggs in a basket.  It means do not put all the money in a single investment. Here comes the diversification of investments.

Investing is as important as its diversifying. Plan the combination of four or five types of risky and non risky investments first and invest.

Young investors can take more risk than elderly investors. Young investors can invest majority of their investments in mutual funds and share market while elderly investors can take less risk concentrating more in investment plans with fixed return.

Investment: Government securities

To raise funds to finance important projects and budget deficits, government issues government securities (G-SEC)  or treasury bills (T-Bills).

The return is fixed and secured and usually better than the fixed deposits.

Moreover government securities are reliable and investors get a good return when there is financial crisis and other investments are not doing well. 

Investment: Other fixed deposits

Investors can invest in companies, financial institution and non-banking institution for a certain period. These companies and institutions pay higher interest to the investors.

Investing in the fixed deposits by the companies and non-banking financial institutions is not easy as the minimum investment amount is higher than the fixed deposits by the banking institutions.

Investment: Gold

Investing in gold is a safe investment. Commonly, we invest in gold in the form of jewellery. Gold in jewellery form has the issue of storage. Banks provide storage facility which is chargeable. There is also making charge in case of jewellery.

We can start a Systematic Investment Plan (SIP)  in the gold funds from mutual funds. Mutual funds save us from storage and making charges.

Additionally, we can invest in ETFs. We must open a trading and demat account with a SEBI registered broker to invest in a gold ETF.

Government issues gold bonds for the investors who are looking for a long term investments. In sovereign gold bond,  investors get a declared interest in return per year till the maturity of the bond along with the maturity value. 

Investment: Shareholder and dividend, bonus and split of shares

When we invest in a company and buy a share from the share market, we become a shareholder for the company.

We are then entitled to a share of the profit or loss of the company. The management of company can declare dividend, bonus share or split of share to reward its shareholders.

Share price moves up and down during the trading session and varies according to the performance of the company. Price appreciation is also the return against the investment for the investors. The shareholders can book the profit against the investments anytime or continue to hold the share for a longer time. 

Investment: Shares & ETF

Investors have the option to invest in company shares or index exchange traded funds (ETFs).

We can invest in the shares of the companies listed on BSE and NSE. Index ETFs like Nifty ETF, Sensex ETF and Nifty bank ETF are also available for the investors who do not have knowledge about the share market. Other ETFs are also available for investors to diversify their portfolio.

Investment: Investing in Share Market

Before investing in share market, we must open Trading and Demat account.

Trading account is used to buy and sell the shares while Demat account is for storing the shares. Trading account is opened with a SEBI registered broker.

Once the trading and demat account is opened, we can place an order after transferring an amount in the trading account from a linked bank account. A buy order or a sell order is placed to buy or sell shares.

Day trading is buying the shares for a single day. The shares are sold before the close of the trading session of the day. And a delivery is buying the shares to hold them for a time period. The shares are sold when the shareholder places a sell order.

Investment Types

Types of investment depends on the choice we make. Investment can be of the type suitable for us.

Investment ranges from least risk one to highly risk one. The choice of investment is highly depending on our basic character. How risky are we?  The simple answer to this question helps in the selection of the type of our investments.

Setting goals, terms of the goals and types of investment makes the complete planning in the matter of investment.

Investment Goals

Investment goals are as important as the investments. Investment without any goal is just like vagabond.

So there should be goals set for investments. Whether you are investing money, time or energy, there should be goals set to record the performance. If the performance is as expected, you are in the right direction and if the performance is below expectations, you need to change your goal.

Goals may be short term or long term or both. After you achieve your short term goal, set another one or extend it to a long term one. 

Investment

Investment is a part of our life and it will always be the part of this world. The present world is the outcome of some sort of investment we all do.

We all do some kind of investment. Some invest money,  some invest time and the rest invest energy. It may be the combination of any two of money, time and energy or all of them.

Investing is not enough. Success in investment is equally important. Not all would be successful in investments.

We should invest for the well-being of ourselves, the people we love and sometimes the people we do not know.