A Guide for Beginners in Investing: Why Should You Start Now?
Today’s post is a guest post from Ankur Choudhary, founder of Goalwise, an investment platform in India. I have no relationship with this company. Please research all the investing options mentioned in this article. With that being said, take it away, Ankur!
Investments and investing money could sound like the “adult” thing to do for many. However, getting right to the point, investing money is one of the most crucial parts of your life. There are many misconceptions about investing money, such as investing money is for those who are nearing retirement, and that it’s something that you do when you land a job with a handsome salary. Believe it or not, none of that is true! You can start whenever you want, and starting early is actually good for you!
The fact of the matter is you need to understand that the earlier you start investing, the better your future will become.
Why Do You Need to Invest Money?
Before we ask you to find the best SIP to invest or list out ways to invest money, you need to understand the importance of investments. Although saving and taking care of money is practically drilled into most of us since childhood, it’s easy to forget or not understand the importance of the same.
There may be many underlying reasons for believing that investments are a thing for the future and not for the “present,” due to which you may feel that you can invest later. However, here are some reasons why you should be thinking about investments right now and looking for investment options:
- Growth of your money: Put simply, investments help you grow your money exponentially. The best way to understand this point is to know that if the money is simply lying around in your bank, you’re more likely to spend it and never see it again. But with investments, you will be able to find a way to grow the money, and simultaneously, save it.
- Retirement planning: Investing money now will help you secure your retirement in the future. You will be able to relax after you retire and you won’t have to worry about how to get by. However, for that, you need to start investing now. The money won’t grow as much in 5 years as it would in 15-20 years.
- Inculcates saving habits: Since the world of expenses is not dying down any time soon, there are a lot of expenses that you will need to deal with on a daily basis. Between all of that, you may forget to save and spend lavishly at some point. If you have an investment plan that requires investing every month, then you would be able to save more every month.
To make sure that you invest in the right places, do not simply look for investments with high returns. Widen your portfolio with various types of options. Usually, the investment options with high returns are laced with many risks, which you may not be prepared to bear.
Is investing early really a good idea?
Now that we understand the importance of investments, you must be wondering if it’s a good idea to invest as early as possible. To answer that question in simple terms, investing money is never a bad idea. Furthermore, whenever you get a chance to invest some money, you should do it right away.
Still unsure? Here are some reasons why you should start investing early on:
- You will be able to save more. When you start to invest money, you begin to get into the habit of saving money, which means you’d be more likely to invest more money during your working years. This will help you to look at a good sum of money in the future.
- When you start to invest money from an early age, you enjoy two benefits, which are:
- Firstly, you understand the time value of money. Regular investments made early on can help you reap massive benefits when you’re older.
- Secondly, you have a solid recovery period. If you incur some loses or make some mistakes, you get to learn from them and recover without actually sustaining a huge loss. This is not possible when you start investing later in life.
- With investments, the future is secure. However, those who invest money from a very young age can see that their future is more than secure for them, as young investors tend to have more saved up for themselves than those who start late.
With the above-mentioned points in mind, it’s clear that young investors are ahead of those who invest later. So rather than quitting on the idea of investment because you do not know how to start investing in mutual funds, find a way to invest in something that you do know!
Some interesting options for beginners
For beginners, the world of investment could be very scary and difficult. With no idea how the market functions and which options to choose from, here is a list of some interesting investment options for those who want to start investing early:
Let’s start with the easiest of the bunch of options for beginners. The real estate market is a wide one, and it’s quite easy to understand. For those who are looking for investments with high returns, this is the one for you. The real estate market is always growing, and you can cash in on huge returns in just a few years. However, the only downside is that you will need a good amount of investment too.
This is yet another easy option for people to try out. The market for gold and silver are usually fixated on an up-down graph. For anyone who is looking for easy investments and a quick way to start investing, investing in gold is the best way. Indians have long been doing it, and have made a lot of money through it.
However, bear in mind, this type of investment is liquid, meaning you won’t get the money instantly when you need it.
The stock market is yet another option. Bear in mind, the stock market is not as easy as the first two options, but it offers a variety and high returns. You could invest your money in IPOs (Initial Public Offering) or go with shares for known brands to grow your money. However, you need to remember:
- You will need a sound knowledge of the share market,
- You will need to understand trading and
- You will have to learn to read the market to make profits.
Going in untrained may lead you to lose your money.
Mutual Funds and SIPs
Mutual Funds are one of the simplest types of securities to invest in. With a fixed amount of return, you do not have to worry about the market or anything, as these are long term securities. The same is the case with SIPs. Both of these options are simple to understand and can help you grow your wealth easily. You can research the web to know how to start investing in mutual funds and begin today!
With the options listed above, you will be able to find the investment option that suits you and your style.
How do I start?
For those who want to start now, here is what you can do to begin:
- First off, make sure that you read about investment options online or ask an adult to help you out. Before you take a headfirst dive in the market, gather information.
- Next, you need to choose which type of investment option you’re comfortable with. Some may be comfortable with investing in real estate, while others would like to try their hand in shares; either way, make sure that you know what you’re good at.
- Before you start, make sure that you have an advisor and a manager for your investments. In the case of the best sip to invest in, you need to have a look at the manager of the same. A good manager for SIPs is instruments. Apart from this, if you invest in the share market, you will need someone to manage your portfolio too.
- Be careful. Do not be greedy once you start seeing results and take unnecessary risks. Investing is a game of patience.
With that, you should be able to invest your money, save for the future, and enjoy your life. However, bear in mind that you would need to stay calm and impromptu decisions may not work for you here. Go slow and steady, learn how to invest and make decisions as per the trends of the market.
Author Bio: Ankur Choudhary
Founder and Chief Investment Officer @Goalwise
Ankur founded Goalwise an online mutual fund investment platform in 2015 to serve as a ‘Fitbit to investing’. They pioneered an investing approach making it easier for users to set, track, and achieve their long- and short-term financial goals. A passionate Algo-investor, he honed his skills as a Researcher and Portfolio Manager at leading hedge funds such as WorldQuant and Oxus investments. He is an alumnus of IIT Kanpur where he pursued Computer Science and Engineering.
Jerry is a Business Insider Contributing Writer who is obsessed with personal finance. He believes you can improve your financial situation by applying principles taught by the financial independence community to your financial life.
If you are having trouble saving, he recommends that you join the SaverLife Savings program where you can get a $60 reward after six months (no income requirement). All you have to do is put a minimum of $20 a month into a savings account. Easy, right?
For a fun read, check out his article 10 Signs You’re a Personal Finance Addict to see if you are a personal finance nerd.
Before you go, check out the new From Broke to Financially Woke Interview Series.
Also, please subscribe below if you found his content valuable and want to continue following him as he documents his own journey from Broke to Financially Woke!