Investment Guide for Beginners: How to Start Investing In India (2024)

22/08/2022 |

Investment Options in India

The investment landscape of India is highly diverse, with a range of options for different types of investors. With ever-increasing costs of living, it has become important to save and invest your funds to stay ahead of the inflation rates and ensure a financially independent future for your family. Here are some investment options in India:

• Stocks: While this is one of the options to generate wealth that beats inflation rates, it also carries high levels of risk. Usually, investing in stocks requires analysing the markets and choosing the ones that can offer optimum returns with minimum risks. You need a Demat account and an online trading account to start investing in stocks.
• ULIP plans: ULIP plans help you combine the benefits of market-linked returns and life cover under one life insurance plan. You can choose the fund options according to your risk appetite. The fund options include equity funds, debt funds, and a mix of both. For example, the Tata AIA ULIP plan offers you the benefit of choosing from 11 different fund options.
• Mutual Funds: Many people find stock investing confusing since they are required to analyse the financials of the company and consider various macroeconomic factors to find stocks that can offer high returns. Hence, they opt for mutual funds. A mutual fund scheme invests in a basket of securities that can include stocks, bonds, gold, etc.
  
• Fixed Deposits: These are one of the most common and lowest-risk investment options in India where you invest a fixed amount for a fixed tenure at a fixed rate of interest. The bank guarantees the interest payment along with your principal on maturity.
• Other investment avenues: These include bonds, gold, real estate, National Pension Scheme, Employee Provident Fund, Public Provident Fund, RBI Bonds, etc.

Smart Investment Tips for Beginners

If you have just started planning your investments, then here are some investing tips for beginners that can help you get started:

• Define your investment goals
  

  While the core objective of investing your money is to generate returns, it is important to define investment goals as they help you choose instruments and determine your risk tolerance levels.

  For example, if you are investing to create a corpus for your retirement, then you might take more risk than investing to fund your child’s higher education. Defined goals are also helpful in buying other products and services that help you achieve your financial objectives with ease. For example, when you invest in a house and take a home loan, then a life insurance saving is a good idea as it protects your loved ones from repaying the loan after you are gone.

  At Tata AIA Life Insurance, we offer a range of plans and riders^# to help you get the life insurance policy you need. You can go through the range of options available on our website and buy life insurance online in an easy and hassle-free manner.

• Assess your risk tolerance level
  

  One of the most common beliefs in the investment market is that risk is directly proportional to projected returns. Therefore, if you want to earn higher returns, then you might have to take more risks with your investment. But taking high risks that are beyond your tolerance limits can be counterproductive. Hence, make sure that you understand the level of risk you are willing to take to generate high returns.

• Start early
  

  One of the ways to generate wealth is to begin your investment journey at a very young age. This gives your money more time in the market to benefit from the general increase in process and the compounding effect. Hence, when you start working, start investing too.

• Understand the stock market
  

  One of the share investment tips for beginners in India is: never invest on a tip or recommendation unless you can back it up with some data. The internet is full of recommendations and strategies that claim to help you make millions in no time by investing in the right share at the right time. Before you follow any such recommendation, make sure that you validate it by analysing the stock yourself. Hence, make sure that you understand the markets before investing in stocks.

• Never borrow and invest
  

  Even if you are confident that a certain investment will offer high returns but don’t have the funds to invest, avoid the urge to borrow money to invest. Remember, every investment has risks associated with it. When you borrow and invest, and if the investment loses value, then you will have to repay it within the agreed timeframe. This can impact your overall financial health.

• Diversify
  

  Remember the old saying – Never put all your eggs in one basket? This holds true for investments too. One of the tips for investing money for beginners is to avoid investing a large portion of your corpus into a single investment or asset class. By spreading your money across stocks, bonds, mutual funds, gold, etc., you can mitigate the risks of overexposure to one asset or instrument or market segment.

Conclusion

These were some of the most basic but important investment tips for beginners. If you are not aware of various instruments and need guidance in choosing the right ones for your needs, then you can talk to an investment advisor and create an investment plan that considers your financial goals and risk tolerance levels. This beginner’s guide to investing highlights areas that you must keep in mind as a new investor.

L&C/Advt/2022/Aug/1841

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