Sunday, September 07, 2008

Investment Tips

Quite often than not, I do get regular inquiries as to where to invest and how to manage/save/grow ones money. Well not to brag about my self, but I have been quite consistent and regular in my savings and investments, all thanks to my roomates in my first PG in Bangalore. Nevertheless, here are a few things you may want to folllow.

[1] Savings and Investments should be regular. ie Either Monthly or Quaterly , depends on the indivual. But dont stretch them more than this.
[2] Keep a fixed amout each month to invest. Start with small amounts however difficult it might be for you. Say 1000/- Rs per month is a good start.
[3] Where to invest ? The options are many, but it all depends on where you are comfortable. Its a good decision to invest partially in debt funds and into equity. Lower your age, the more risk that you can afford to take.
So, if your age is example 25 years[x years], invest 25%[x %] of your investment in Debt ie Fixed Deposits, NSC, Bonds, where the risk is less and fixed returns are assured, but not very high. You wouldnt get more than 10% returns on these investments.

Now the remaining 75% [(100-x) %] should be invested into equity. Again you have different options to invest in equity. It basically boils down to the fact that, how much knowledgeable are you in stocks and how much TIME you can invest.
If you are new to stocks, and also no time, Mutual Funds are a good option. But remember there is not much transparency in MF's. But then its better than investing on your own on stocks.
In MF's too, its better to go for SIP [Systematic Investment Plans] , in which you invest regularly a fixed month in a fund rather than a lumpsum amout. It would reduce your risk a lot.

Another option to invest in MF's in through ULIP Insurance Plans, if your requirement is also to cover yourself against the unforseen events. So in this case a part of your investment would go to your insurance cover and the rest to MF's as per the Fund Manager. This also helps towards your Section 80ccc for tax , permissible to a maximum of 100,000/- per year.
A lockin of 3 years is a common feature among most of the Insurance Policies which have ULIP added to them.
There are some MF's for tax benefits, but remember these have a lock in of 3 years.

You would now ask, where have I invested or what I would have done?
Well my answer is simple. I would go in for a small portion of investment in a Recurring Deposit, which would be as small as 1000/- per month. In the long run it becomes a lot.

If I had to invest in FD's I would take one FD with all my amount in that, rather than having 5 seperate FD's. Why ? Ask me if you need clarifications.

I would also invest a major of my investment in MF's with probably running 5 SIP's a month , a 1000 each in 5 different funds. That helps me diversify my portfolio. Now is Diversifying good. yes and no. Depends upon you as an investor. If you are an expert you wouldnt diversify, if not, you better to average out your odds.

I also would invest in stocks also. For starters invest in some safe companies, with some small amout which you can afford to LOSE. Play with that money and you will earn or lose a bit, but you will have fun and learn a lot. I normally think of long term investment rather than day trading. Simply because of the fact that I dont have time to do day trading, nor do I hve the expertise. All I could probably do is gamble. I would say long term investment in Stocks is safe and good returns also.

I would add more articles on Investment in some time soon. Keep tracking. Have fun investment.

"Make money work for you rather than you working for money"