IT’S ALL IN THE MIND
Most people have the impression that fi nance is difficult and confusing, but it is not. If you go beyond the jargons, you will find that it is not just for those savvy with numbers. So, you will have to first get rid of the mental block that you do not know how to invest, and hence, may lose money. This is not true. The basic rule in the investment world is ‘buy low, sell high’. If you apply this rule to any asset – Stocks, Bonds, Mutual Funds, Gold, Real Estate, etc., you will turn out a winner. There are also many investment products structured for those who do not want to put in a lot of time and hard work. Mutual Funds are the best example. All you have to do is invest your money in the scheme; the Fund Manager will take care of the rest and help you earn returns.
BUT FIRST, START SAVING!
Saving is the fi rst step of any investment. You have to set aside a portion of your income as savings. Otherwise you will not have any money left for investments. So, take stock of your income and expenses, and see if you can maximise your savings. Remember, as you grow older, you will have more responsibilities as well as expenditures. Make the best of your youth and save as much of your income as possible. Better yet, make a plan. This could be something as simple as setting aside a fi xed portion of your income, say 50% every month. Use the remaining for your monthly expenses. This will make you a more disciplined investor.
NO LUMP SUM INVESTMENT
If you are just starting out in your career, it is quite likely that your pay-check may not be large. Don’t let this stop you though. Savings and investments need not be large amounts. You can set aside as small an amount as ?500 or ?1,000 per month. Invest through an SIP or Systematic Investment Plan, which allows you to stagger your investments in monthly instalments. This may make life much easier for you. In fact, it could even turn out to be a better option in the long-run.
POWER OF COMPOUNDING
And that is because of the concept of compounding, when you earn interest on past interest payments or profi ts. For example, if your Mutual Fund gives you an annual 10% return, you could choose to reinvest this amount and buy more MF units. These extra units could also earn you 10% return the next year. This process goes on and on. Eventually, your fi nal return would be much higher than the annual 10% return.