Investing intelligently is undeniably the most infallible and safest way to create wealth over time. No matter where you are in your investment journey, it’s time to grow your money as hard as you are.
However, when it comes to investing, as it should be, there is no one-size-fits-all solution. How you invest, what you invest in, and when you choose to invest has a lot to do with how you are positioned. Personal finance is good… “personal”, after all!
The investment should ideally be based on the following parameters:
Your long-term investment goals
Have you ever heard that? You probably have! But have you taken a pen and a sheet of paper to write down your short, medium and long-term investment goals? If you decide to invest a certain amount of money, when do you think you will need it? Are you going to need some of it in two years for a down payment on your car, in five years for that down payment on a house, or do you need to periodically withdraw money from your investments to meet your needs? . travel goals? Each objective may require a different investment instrument or even within the same instrument, different defined durations, to allow you to achieve these objectives.
Your investment approach and style
Are you an aggressive investor who is comfortable with high stakes and the high risk that comes with it? Or have you always chosen the most conservative investment instruments that offer you guaranteed periodic returns? Your lifestyle, budget, risk tolerance and general interests could help you better understand who you are as an investor.
How you choose to invest your money should also depend on:
The time you need to devote
You may be the type of person who spends a few hours fine-tuning your investment strategy every day. Someone with a high risk tolerance may be more comfortable spending time trading and monitoring the stock market frequently. On the other hand, if you are someone who has chosen to invest in products that do not require you to constantly monitor and manage them, mutual funds might be the right investment for you.
How much do you want to know
All the time in the world wouldn’t help you if you didn’t constantly learn how to up your investing game. Whether you are someone who wants to stick to a conservative approach – provident funds, fixed deposits and debt funds, or someone who is more willing to take risks – stocks, equity investments, crypto; how you choose to invest should ultimately be based on what you know and what you are willing to learn. You should know the basics of each type of investment before making a decision.
Choose investments that correspond to points 1 and 2
Determining “how” to invest money involves asking “where” you should invest money. Common investment options include:
Stocks: Individual stocks (equities) of companies that you believe will increase in value over time.
Bonds: Bonds allow a company or even the government to borrow your money as part of an investment to finance a project. Bonds are considered fixed income investments and generally pay regular interest to investors. The principal is then returned on a due date set in the future.
Mutual funds: investing your money in funds – such as mutual funds, index funds or exchange-traded funds (ETFs) – allows you to buy multiple stocks, bonds and/or other investments at the same time . Mutual funds create instant diversification by pooling investors’ money and using it to buy a basket of investments that match the fund’s stated objective. Funds can be actively managed, with a professional manager selecting the investments used, or they can track an index.
Gold: Gold has become much more accessible as an investment in financial form, through government gold sovereign bonds, digital gold, gold ETFs, etc.
Real Estate: Real estate is a way to diversify your investment portfolio outside of the traditional mix of stocks and bonds. Real estate that you do not live in and occupy is generally considered an investment.
So here are some tips to keep in mind as you move forward in your investment journey and build your investment game.
(This article is written by Dipika Jaikishan, COO & Co-Founder, Basis, and is co-written by Rebecca Edwin, Head – Content, Basis)