Embarking on an investing journey? Here are a few things you must do

A lot of new entrants face tricky questions in terms of where and how to start their investment journey. But here are a few things which are essential to address before jumping into the world of investing. 

1. Know Yourself

First and foremost is to know yourself as an investor!

According to Gaurav Goel - Entrepreneur, SEBI registered Investment Advisor- all investors are different from one another, and one stitch does not fit all. 

“Wannabe investors should know what they want from their investments,” Goel said.

A few critical questions investors should answer are:

- What is my net worth? What are my assets and liabilities?

- What are my monthly expenses?

- How much monthly surplus do I have to invest after adjusting for expenses and liabilities?

- What is my timeframe for investing?

- What return do I expect to earn from my investments?

- What is my risk profile? Am I a risk-taker or do I shy away from risk in my portfolio? Does it match the returns I expect to earn?

- Do I have adequate life and health insurance?

- Am I saving for my retirement?

2. Know Your Investment Options

Investing your money in the right options is half the battle won!

Investment options can be broadly classified into two main categories: Aggressive Assets and Fixed Income assets.

Aggressive assets are high-risk, high-return investments. There is a possibility of losing your capital as well. However, they also give higher returns and help beat inflation. One of the prime examples of such products is equity investment.

On the other hand, there are fixed-income investments. These investments carry little or no risk but returns are generally poor. Most often they do not even beat inflation which eats net returns from the portfolio. Examples of this category include Fixed Deposits and debt mutual funds.

"It's important to have the right mix of both these products. This is called Asset Allocation. This right mix depends on the risk-taking ability of the investor. There are ways and means of assessing an investor's risk appetite. This is called risk profiling. It’s also important to diversify your investments. As they say, don’t put all your eggs in one basket. Spread your risk," Goel added. 
 

3. Think Long Term

The best way to generate wealth from your investments is to view it holistically. Investors should do comprehensive financial planning for their entire wealth and not on a piecemeal basis. The benefits of compounding which has often been considered the magic potion of investing, accrue only in the long term. A lot of investors look for options to become rich overnight. This notion is a cardinal sin and should be rejected immediately. Do not succumb to tips, social media noise, and advice from unregistered advisers.

4. Seek Help

Most investors need assistance especially when they need to address the to-do list mentioned above. They don’t know exactly what they are capable of when it comes to investment behaviour. Investors should not hesitate and must seek help if they wish to invest the right way.