Showing posts with label Mutual Funds. Show all posts
Showing posts with label Mutual Funds. Show all posts

Saturday, March 27, 2021

How to Start Investing: And What to Invest in



Investing money is a very reliable way to build wealth over a period of time. However, the whole process can seem very daunting if you’re just getting started. 

The good news is that many wealthy investors too started with a level of skepticism, but they somehow got to learn the right steps to take, implemented them, and became successful. Today, you’re going to learn the basic steps you need to take to start investing, and what to invest in, so keep reading!

Determine how much you want to invest


Many investment options today allow people to invest low or high amounts of cash. Therefore, it makes sense to begin by deciding how much you’re willing to invest before choosing your methods. Of course, the amount of money you want to invest should be informed by your investment goal.

If you are looking to secure your retirement, for instance, you should generally aim to invest between 10% and 15% of your yearly income for retirement. Ideally, regardless of your goal, you have to consider your time horizon and the amount of cash you need, and then sort of work backward to break the amount into weekly or monthly investments.

Know your options


The most important part of investing is understanding every instrument available and the level of risk it carries. Some of the most popular investment options you’ll want to consider include the following:

Stocks. These are shares of ownership in a company, and you buy them for a share price. When the company profits, you too profit.

Bonds. These are loans you give to a government entity or a company. Before the organization pays you back, you get interest.

Index funds. These are investment vehicles that track market indexes. You can use them to balance your investment portfolio.

Mutual funds. These are collections of investments that allow you to buy a diverse assortment in a single transaction instead of picking individual bonds and stocks.




As a beginner, you should look to invest in these instruments because they are profitable and generally safe.

Pick a strategy


The next thing you should do is pick an investment strategy based on your saving goals. For instance, if you’re planning on securing your retirement, and your goal is more like two decades away, you can invest most of your money in stocks. If you don’t like the process of picking specific stocks, you can go for mutual funds or index funds.

If your goal is short-term, and you need the cash within a shorter time-frame, such as five years, you can consider Bank certificates of deposit (CDs) and short-term bond funds. 

If you’re more comfortable waiting to see your money and investing long term, then a DST 1031 property investment may be a good idea.

Alternatively, you can skip this step by opening an investment account through a qualified Robo-advisor. They’ll help you build your investment portfolio and look after it.

Understand your risk tolerance


As you may already know, not all investments are successful. Every investment comes with a certain level of risk, although it’s usually correlated with returns. Before you invest, you need to find a balance between maximizing the returns and getting a comfortable risk level.

For instance, if you are willing to lean more towards forfeiting high returns to reduce risk as much as possible, you can go with bonds. 



They are very low risk, and they yield relatively low returns of around 2-3%. On the other hand, you can go with stocks to enjoy the annual returns of about 10% per year, but be ready to incur higher risk.

As you can imagine, there is a huge difference in risk within the broad categories of bonds and stocks. For instance, Treasury bonds are very low-risk investments, and they usually have low-interest rates. 

That means that the reward is low. Conversely, a high-yield bond comes with a higher risk of default. Although it’s important to keep risk at the back of your mind, you shouldn’t get over-concerned about it, according to Forbes.

The best way to approach this is using a Robo-advisor to create an investment plan that suits your financial goals and risk tolerance.

If you’ve just decided to start investing, congratulations! You’ve already completed the first step. What you need to do now is follow the next steps above to get started.


Tuesday, February 26, 2019

A Guide to Start Investing




Every wealth management advisor will start with one very basic principle: you need to save money--and the earlier, the better. We don’t think it’s necessary to convince you of the wisdom in that.

Here’s the problem: for most of us, investing is much harder than it sounds. There are already too many demands on our money: student loans, rent, car repairs, and groceries, just to name a few. Buying a new alternator before you go on that road trip is a much higher priority than saving up for retirement.

When you’re living on a shoestring budget, how can you invest without making major sacrifices in your life?

Well, here are some ways that you can start investing NOW - not when your car is paid off, not when you’ve finally gotten around to setting a budget, not when retirement gets close enough to scare you straight. You can put these principles into action without feeling like you’re living like a pauper.


Making Short-Term Investments


Sometimes we have expendable cash for a little while, but we’re anticipating big costs in the future, so locking away that cash into a long-term investment account feels crazy. However, there’s a better option than letting it sit in a savings account with a return of 1% or less: short-term investments! 


When it comes to short-term investments, it’s better to focus on low-risk options, since there’s not as much time for the investment to self-correct. However, even low-risk, low-return investments will do you a lot more good than a savings account. 




Talk to your investment broker about short-term investment options, or check out some easy online investment software or apps (like Acorn, Robinhood, and Betterment) that will let you play with short-term projects.

Setting Up Automatic Deposits to Investment Accounts



This is one of the most reliable and time-honored habits of smart investors. Automatic deposits into a retirement account will allow you to invest without feeling the pain of conscious deductions. If you invest before even counting that money as part of your monthly income, it doesn’t have the same pang. 

Use Extra Savings Techniques to Grow Your Investment


We all have a few things that happen throughout the year that just feel like bonus money. Any time you have that boost, consider turning it into investment, instead of an indulgence that will depreciate the moment you buy it.

  • Tax returns: We’re in a dangerous place when we start considering tax returns money that’s owed to us, because we never know precisely how much it will be. Consider depositing the whole amount as soon as you get it, or treat yourself to something you really want or need, but turn over any surplus to savings.
  • Yearly bonuses at work: If your company does yearly bonuses, think about it as a gift towards your retirement instead of fuel for yet another Holiday impulse-buy.
  • Rebates: Some are factored into the price of something we buy, but some rebates come as a surprise.
  • Sales: Did you just save 30 bucks on that jacket that you really wanted to buy? What a windfall! But most of us will forget about those savings, or spend them on something we don’t need because we look at it as free money. Put that free money to work instead.
  • Resolution savings: Have you ever gone without a certain treat for a certain amount of time, due to Lent, or a health resolution with a friend? When my grandmother wanted to quit smoking, I promised to give up chocolate to support her. Even more than the health bonus that this brought, I realized that I was saving up to $15 a month by cutting an unhealthy habit out of my life. It’s not much, but it does add up! We all need our indulgences, but the next time you make a health resolution, consider the savings in cash. It will keep you motivated because it’s a positive benefit that you can see right away. To keep from rewarding yourself by falling straight back into your favorite treat, put that money towards a rainy day instead.

Bonus: Educate Yourself, Over Time


As you can see, it’s fairly simple to start investing. All you need to do is put your best foot forward to start getting involved. The key, after that, is to continually get better and better at it. 

This comes with continuously educating yourself about what your accounts are doing, and what you can do in the future to improve your portfolio. With time, a clearer understanding of things like fund transfers, cryptocurrency, and common vs preferred stocks will feel like 2nd nature to you.

In Summary!


So, next time your dad guilts you about planning for retirement, or you read an article that makes you feel way behind in money matters, don’t beat yourself up about it. Just put these three methods to work and watch your savings accumulate without feeling the pain.



Friday, February 17, 2017

Types of Mutual Funds: Everything You Needed To Know



Mutual Funds are one of the most preferred investment instruments for Indian investors; what’s more, this is one sector that is continuously evolving with time.

A lot of people prefer keeping their money safe and relatively untouched, in their saving accounts. Others understand that investing in Mutual Funds, while it has risks, also pays off handsomely. This is primarily why more and more people flock to this mode of investment.

Here’s everything you’ll need to know about Mutual Funds, and investing in them.


What is a Mutual Fund?


A Mutual Fund is, in a nutshell, a bucket of money from different investors like you. This bucket consists of various investment instruments like stocks, and bonds. Investing in a mutual fund is much easier and safer than investing in individual bonds and shares.

Plus, you can sell your shares whenever you want.




Mutual Funds are managed by qualified and experienced finance professionals who use this money to create a portfolio. You (as an investor) don’t own individual securities, but shares of the fund. You can invest small amounts of money—any amount you choose, really—and benefit from the profits in this collective portfolio. 

Each and every shareholder has an equal share of the fund’s gain and loss, and experiences them proportionate to the amount they invested.


Types of Mutual Funds


There are different types of Mutual Funds in India, and it’s really important to choose the right one based on your investment goals. Broadly speaking, there are two types of Mutual Funds, and various types of MF schemes under both of them. Let’s take a closer look at them.

Open-Ended


Open-ended Mutual Funds are available for subscription for the entire year. You can sell or buy whenever you want; there is no fixed maturity date.

Equity Funds/Growth Funds

Here, you invest in stocks of different sizes or in equity shares. Equity funds are one of the most popular choices among investors today. They have the risk of high losses in the short term, with the advantage of modest capital appreciation in the long run.

Debt Funds/Income Funds

A major portion of the investor fund is channelised towards government securities, debentures, and other debt instruments. Capital appreciation is low, but there is very low risk involved. Given this fact, this is an ideal investment vehicle for investors looking for a steady income.

Money Market

This is ideal for you, if you are looking for short term gains and better options at the same time. The money is invested in short-term debt instruments, and reasonable returns are guaranteed.

Index Scheme

An Index Fund is more common outside of India, in the Western world. It makes use of a passive investment strategy, and replicates the pattern of benchmark indices NIFTY and SENSEX. This means the capital appreciation (and depreciation) of such a fund coincides with the rise (and fall) of the indices.





Sectoral Scheme

Sectoral funds are invested in specific sectors like IT, infrastructure, and pharmaceuticals, or in capital market segments like mid cap and large cap segments. The return is high in this scheme, and so is the risk.

Tax Saving Scheme


Offering tax benefits to investors, your money here is invested in equities; long-term growth opportunities are quite common here. Tax saving schemes usually have a lock-in period of 3 years.

Balanced Funds

With balanced funds, you can enjoy income and growth both at the same time. The fund is invested in fixed income securities and equities both, the proportion of which varies and is written on investment document.

Close-Ended

Such MFs come with a predetermined maturity period and you can invest only during the initial launch period or New Fund Offer (NFO) period.

Fixed Maturity Plans (FMPs)

As you’ve probably already realised given their name, FMPs come with a fixed maturity period. They comprise mainly of debt instruments that mature at the same time as this scheme, and earns through the securities’ interest component.

Capital Protection

The primary aim of this scheme is to safeguard your principal amount and earn reasonable returns. 


Why invest in Mutual Funds?


There are many reasons why you should invest in Mutual Funds. Some of them are:

Diversification

Every investor worth their salt knows not to make the mistake of putting all their eggs in one basket. The same rule applies in the investment market as well. It’s a known fact that diversification is the key to making profits, and investing in mutual funds ensure just that.

It’s important that you invest in different types of securities. In most cases, debt markets don’t yield great results when the equity markets do, and vice versa. If you’re intent on creating a portfolio of your own, it’ll take quite a bit of time. With mutual funds, you can easily diversify your assets at a low cost, as these are available for as low as Rs.500 a month.

Professional Expertise

Investment isn’t everyone’s cup of tea. It requires skills and continuous evaluation of market dynamics. Anybody can park their extra money in the investment market. However, in order to get returns, you need to learn the skills of managing money professionally.

Mutual Funds have qualified investors who understand the market well and take the right decisions as far as investment is concerned.

Liquidity


Mutual Funds usually don’t come in with a lock-in period, and the money you invest is available to you all the time. Ideally, it takes a couple of days for the fund to return your money; it is usually sent to your bank account.

Transparency

Each and every Mutual Fund’s performance is reviewed by rating and publication agencies and you also get regular updates as being a member of the fund. 


How to Invest in Mutual Funds?


In order to invest in Mutual Funds, you need a bank account and a PAN card. All you need to do is fill an application form, furnish your PAN detail (typically if you’re investing more Rs.50,000), sign your cheque and submit the same to financial institutions. You can even invest online.

Now that you know the different types of Mutual Funds and their meanings and how to invest in them, take a call and start investing. Good luck!



Join 1000's of People Following 50 Plus Finance
Real Time Web Analytics