Smart Investing for Beginners

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One of the biggest fallacies that prevail is the belief that investing is reserved for the upper echelons of society and is not universally accessible. However, the democratization of the internet, and access to free resources – of which Angel One’s Knowledge Centre and Smart Money are two key examples – have opened up the world of investments to the masses.   

Beginners seeking to develop habits of smart investment can consider incorporating and taking into account the suggestions mentioned below.

1. Keep tabs on your financial goals and the time frame within which you want to accomplish them 

Prior to investing your money, make sure you determine what goal you are trying to achieve by investing this money. Doing goal-based investing helps you to pick the right investment option and hence increases the chance of higher returns. 

Also important here is understanding the time you are willing to allocate to fulfilling this investment goal. In the event that the time horizon you have outlined for yourself is short, the decision to invest as a means of achieving this goal may not be appropriate.

You must understand the fact that there exist several financial products in the market and each of these assets fulfills different investment goals as they are each governed by different regulations and norms.

2. Ask yourself “what is my threshold for risk and how diversified is my portfolio?”

While all investments carry with them a level of risk owing to the inherent volatility that prevails within markets, it is of paramount importance that you as an individual investor know your risk tolerance. Furthermore, you must not put all of your eggs in one basket. 

By diversifying your portfolio and spreading your money across a number of investments you can reduce the extent of risk you expose yourself to. 

Keeping this in mind, Angel One’s rule-based investment engine, ARQ Prime1, is worth noting here. This tool recommends stocks to investors with the aid of rules that are devoid of human intervention meaning that it employs “Smart Beta.” Here, time-tested rules help recommend stocks that include value stocks, quality stocks, growth stocks and high momentum stocks.

3. Take into account what percentage of your money you’d like to save and what percentage you’d like to invest.

Different investors enter the investment markets owing to different circumstances. Keeping this in mind, investors should only save as much as they can. Ideally, however, you as an investor should begin by saving 20 percent of your income.

The more you save, the better.

However, the process of saving in itself may be hard as it often requires you to make adjustments to your existing spending patterns. One of the first things to do once you begin to save is to create an emergency fund that amounts to anywhere from 3 to 6 months’ worth of your monthly expenses.

After this emergency fund has been created, additional funds can be invested that isn’t being directed toward specific expenses that are near-term. Provided prudent investments are made – and are held for a long period – they can bring in ample capital.

Final Thoughts

As a beginner, smart investing can appear daunting, however, resources made available by Angel One provide investors with the tools needed to navigate the markets with ease. This information in turn can help investors make smart investment decisions that can potentially build wealth in the long run.

ARQ is not an exchange-approved product and any dispute related to this will not be dealt with on the exchange platform.

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