So you want to start saving some part of your income left after expenses. The habit of saving and money management in general has always been a chief concern for people mostly because of the availability of so many investment alternatives. To add to the problem and confusion there are so many products serving the same goal in the same niche, for example – within equity mutual funds space there are many different options, same with debt funds, gold funds etc.
Further, each individual has varying needs and expectations and different plans for the future. While you may have priorities like repayment of loans, others may look at options to secure their children’s studies and still others may want to save for their retirement. For this reason, it is not possible to have a one plan fits all kind of portfolio. Your money management goals should be based on these individual requirements.
Allocating a portion of what you earn (or save) towards purchasing stocks in a systematic way is one of the most rewarding ways to grow your money over the long term.
To achieve this goal, people often look for pre-made systematic investment plans. Such plans are a great way to stay disciplined and grow your money over a period of time. You get the benefit of a professionally managed team of experts looking at your investments for you. That said, if you are someone who is disciplined and if understand how to look for good companies, you could start investing in a disciplined manner on your own. Not only will you save up on commissions but will also be able to make your investments decisions based on your own risk profile as opposed to being clubbed along with a pool of other investors.
[I] Have a rule – Somehow you always manage to find the required amount to pay your electricity bills, phone bills, rents, credit card etc. This happens month after month. Why then are you not able to put a small amount towards your savings. As a rule, save at least what you pay towards your phone bill every month. Anything higher will be a bonus.
[III] When you just start investing, stick with well established large caps, well performing companies that have a record of declaring good dividends. Allocate a major portion of your capital to these stocks (i.e. 60-70%).
[IV] Research, research, research. If you want to get better, read as much as you can from wherever you can (sign up for my newsletter here, and keep in touch), read all sorts of opinions, advice, articles but agree with none of them unless you are convinced of the argument yourself.
[V] Never ever rely on a market tip or rumor, let alone invest on that basis. Even if the alleged news comes from the top management, who may be your friend’s uncle, it is likely to cause significant harm to your portfolio. Remember – even if a particular stock tip leads to some desired movement in stock price, over the long run, if you start trading on that basis, such tips will ruin your money management regime. There are thousands of companies (if not more) which provide tips online and over SMS’s. Here is the only thing you need to know about them – they are all fraud.
About the Author
Rajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.Follow @SanaSecurities