Wednesday, March 22, 2023

9 important and effective tips for first-time investors


It’s always better to invest out of the money you have earned and saved after meeting your financial obligations.

First-time investors usually have several questions in their minds like where to invest, how much to invest, how much profit should they anticipate, etc. However, it’s crucial to clear as many doubts as possible before embarking upon your investment journey.

Here are a few important tips that you should follow before investing for the first time.

1. Train yourself first

It’s highly recommended to train yourself before you start investing. You should have complete clarity about the products you’re investing in and also understand the risks they carry, their returns-generating potential, their lock-ins, associated charges, etc. You may gather information from sources like books, online articles and videos or through certified advisors. To understand more complex investments like direct equities or commodities, you can also consider enrolling for online courses. Once you are sure that you know your investment products well, you can start investing in them.

2. Aim to invest according to your financial goals

Ideally, all your investments must be pegged to your short, mid and long-term financial goals. Now, setting of these time-bound goals could be a bit tricky when you’re young, nevertheless, you should give it a try. Typical goals could be to build a corpus worth Rs. 1 lakh in a year to buy a high-end laptop, raise Rs. 4 lakh in 3 years to buy a car or Rs. 25 lakh in 5 years for your first home’s down payment fund, etc. Your financial goals will provide critical insights about your investment amount, investment tenure, investment products, risk tolerance, liquidity requirements, etc.

3. Know your risk appetite

It’s not unusual for new investors to panic if their investments show losses at the beginning. As such, it’s highly important to understand your risk appetite before you start investing. If your risk appetite is low, you may avoid higher exposure to risky investment avenues like direct equities or their derived products like small-cap equity funds and also explore opportunities in low-risk avenues like recurring deposits and debt investments.

4. Start slowly

It’s advisable to avoid rushing into an investment when you start it for the first time. Investment should be strictly attached to your financial goals. So, you should start slowly and gradually increase the exposure so that your investment can help you achieve your goals in time.

5. Diversify your investments

As a new investor, you may find some investment to be highly attractive and, at the same time, others to be boring. Every investment product has a distinct purpose, and it may help you in achieving your financial goals. So, avoid putting all your money in a single investment product that may excite you initially. Diversify your investments across different types of instruments consisting of varying asset classes and risks, and offering a different level of returns. Doing so could keep your overall investment portfolio risk under control and ensure consistent and attractive returns which you could help you to timely achieve your financial goals.

6. Don’t invest just to save on taxes

Investing for tax-saving purposes is very important, however, tax-saving compulsions shouldn’t be the only reason for investing. Instead, you should aim to invest to meet your financial goals while also exhausting the tax-saving deduction benefits at your disposal. Investing only to save taxes might generate inadequate returns or involve long lock-ins which might hinder your journey to meet your financial goals in time.

7. Don’t borrow to invest

It’s always better to invest out of the money you have earned and saved after meeting your financial obligations. Avoid borrowing money for investing purposes. It can put you at risk of a debt trap if your investments go wrong. There is nothing wrong in starting with a small amount when you start investing for the first time. Later you can increase the investment size once your income increases.

8. Start early and invest regularly

Some people delay their investments thinking they’ll start later when their income grows. Here they go wrong. It’s always better to start investing at an early age. A regular investment with a small amount can grow very big if you start at an early age compared to an investment of a greater amount that you plan to start at a later stage in your life. By investing early, you allow more time for your corpus to multiply with compounding benefit. An early start and regular investment can help you make a big corpus without the requirement of big-ticket investing at a later stage in your life.

9. Regularly review your investments

You may realise your investments don’t match with your financial objectives, or it may not fit into your return expectations. So, regularly reviewing your investments can help you identify the mismatch and make investment changes to realign them with your financial objectives. If you find it difficult to review your investments, you may take the help of a certified investment advisor.

(The writer is CEO,

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