Below are some important points about investment which you must keep in your mind while investing.
- Diversification: Never put all eggs in same basket. Always invest money in two to three different places like real estate, gold, equity and debt instruments like FD and Debt funds etc.. By doing so, you can minimise your risk of losing your entire investment.
- Start Saving and investment early in your life: Time is money. It is not just a saying but a proven fact. Always put your money to earn for you. As you give your investment more time, your return will grow faster due to compounding effect. To reap benefits of compounding, you need to give 5 to 10 years time to your investment. Encourage your youngsters to start investing in safe avenues like PPF and debt funds. Even Rs500 investment over a period of 20-25 years can fetch you big corpus. You can even start with Rs100 in some mutual funds through SIP. To know more about Mutual Funds you can read my article by clicking here.
- Discipline and regular investment: Small amount invested regularly can give you bigger amount than big amount invested irregularly. Most often, we wish to accumulate big amount for investment. However, when we have some need, we take out some money from this amount and this way our investment plan remain a plan! Invest monthly whatever surplus you have and discipline yourself to save every month that small amount whatever be the condition. Make regular investment a rule of your life not a habit.Because habits you can change, rules you can’t.
- Egg, Chicken and Hen method: Whenever you invest, always invest with short term, medium term and long term perspective.Because you will need money in every part of your life. Thus, investment must be goal orianted like retairement, education, foreign tour and marriage etc. For short term, always keep some money (equivalent to minimum 6 month of your earnings) in saving account or in liquid funds, which can be redeem immediately. For medium term (2-5 years), invest in large cap. Mutual funds, Gold and other such instruments. For long-term investment, invest in PPF, Index funds, FD, NPS, debt funds, gold and govt. securities. You may not get high return but your money will be safe and with time it will grow rapidly.