9 Tips to Become a Smart Investor in India – A Beginner’s Guide

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It goes without saying that investing, these days, must be a part of your monthly fund allocations – like you allocate funds for monthly grocery, entertainment, petrol bills and so on. A chunk of your income must be regularly invested in investment products that you understand and that can get you reasonable returns on time.

In a sense, most people do that and invest in multiple segments but a very few get to be a smart investor and let their money do the talking for them. This set of people are not, necessarily, financial experts or gurus but follow few basic rules of investment that make them stand out of the herd.

That is what all people say, but how can I be a Smart Investor as well?

Well, that’s the thing, there is no exact science one needs to follow to be one smart investor. All you need to do is follow certain proven practices, be open to learning and by time, you will find yourself pretty much natural when it comes to different intricacies of investing.

And How do we do that? Let’s start by step and see these 9 different tips to stay aware and consistent and thus, by time become a smart investor! Here we go:

Start Early

Smart Investor

There is something called the “Compounding Effect“. It applies amazingly to investments. If you start early, maybe right from your first job salary days, then the kind of returns you may expect in a few years would be really high as compared to the point if you start 3 years or 5 years dow.n the line.

That’s the magic of an early start. A smart investor must know that with inflation in place, if your money is staying invested, then not only it is cancelling the impact of inflation but also it produces increasing returns on the capital.


Know Your Requirements

Smart Investor

You need to know why exactly are you investing?

What are you going to do with these investments once they get mature?

How much do you need?

When do you need?

To be a smart investor, You must be clear how your investments are going to be used by you in the future. Are these for your kid’s education, marriage, vacation plans, retirement, buying a house or anything else?

Different people have different aspirations and money is something, that is obviously needed in different phases of life.

So, if you are putting your hard earned money into an investment plan today – then there must be a sight in your head for its future usage.


Choice of Investment products

Smart Investor

Indian financial space, today, is one of the most interesting and dynamic ones in the world market. There is a huge variety of investment products available depending on your requirement. There are products such as Mutual funds, Equity shares, PPF (Public Provident Fund), Gold ETF, Bonds, Currency and more.

A smart investor must have some basic understanding of the kind of investment product you choose for your capital. Even better, if you understand its dynamics completely.

Different investment products have different risk level and complexity attached to them. At the same time, different investment products bring a different level of returns. Here we are listing a range of return percentage you can expect from different investment options:

  • Mutual Funds – 5% to 10%
  • Fixed Deposits – 6% to 8%
  • Gold ETF – 6% to 12%
  • Equity Shares – 5% to 15%
  • Currency – 3% to 10%
  • Real Estate – Depends on location
  • Bonds – 4% to 9%
  • Public Provident Fund – 8% to 9%

Understand Your Risk Appetite

Smart Investor

Different people have different risk appetites. Some can stay invested during low times, some pull out as soon as they see a small negative deviation while some invest when the market goes down. It all depends on building your investment grounds.

If you have done a detailed fundamental analysis of the investment option you have put your capital in and are aware of the market situations, there are minimal reasons for you to pull out.

At the same time, without a doubt, the saying “Higher risk may bring higher returns” definitely sounds optimistic to ears but yea, it certainly requires you to increase your risk tempo at the same time.

Different investment products bring corresponding risk levels, for instance, the risk with Fixed deposits is one of the animals in the industry while Equity brings relatively higher risks with it.

That also implies that fixed deposits give you an average return where Equity provides decent returns as well.


Diversify Your Investments

Smart Investor

You must have heard this a lot – “Don’t put all your eggs in the same basket” so many times, right? Have you tried to employ or put this saying to actual work?

Basically, its good if you are already investing or thinking of doing it – but you have to make sure that you don’t end up putting in a major chunk of your investment capital in one or two investment products.

This diversification of fund allocation directly helps you to minimize your risks and in adverse situations, you do have few fallback options that can neutralize your losses.

A smart investor may be choosy, but at the same time, he/she must make sure to perform a detailed research before finalizing the list of segments you look to invest in. This might take some time, but certainly, it will be worth it.


Invest Consistently

Smart Investor

To stand out as a smart investor, one of the most important factors is to make a habit of investing. Whenever, you feel a specific amount that is potentially non-usable for the moment – put it to work. Invest it!

This regular habit of yours can do wonders and help you stand out among other fellow investors.

Furthermore, don’t worry about the amount value. Even if you invest with small money chunks, overall investment value after a point in time – will be decent.

For instance, if you get a small raise or the yearly bonus – make sure you have something in mind already running to put these chunks into work.


Don’t just follow what others are doing

Smart Investor

In the world of investing, you will certainly find self-made financial gurus, stock market experts everywhere. Keep your eyes and ears open to stay aware of happenings around the financial space.

This will give you the first-hand advantage as you will be always informed about market dynamics.

For instance, if you are investing in the stock market, you may find tips and recommendations from your friends, relatives, experts from stockbroking houses or advisory services and what not.

At the end of the day, a smart investor needs to perform his/her technical or fundamental analysis to be very sure where the money is being put to work.

It’s as simple as buying a mobile phone where you do a thorough research on its features, life, brand and so on. Buying stocks is no different, it just requires much more attention. Well, at the same time, it brings highest of the returns as well.


Keep Learning and Educating Yourself

Smart Investor

Irrespective of the fact you are 20 years old or 50, you are an MBA or a student – to consistently get returns from your investments, you need to keep yourself open to learnings.

This will require you to start from the very basics where you understand the fundamental terminology to go up to advanced investment levels, in case you aspire to.

But one thing is important, you need to consistently learn and make it a part of your life.

There are multiple ways to do it:

  • You can refer few books to start with
  • Keep a habit of going through investment journals
  • Subscribe to financial blogs
  • Newspapers and so on.

Monitor Your Portfolio

Smart Investor

Once you have put your money into different investment products, that is not the end of the road. And this is what 95% of non-smart investors believe. Only a small set of investors understand that they need to keep a close look at their investments at a regular level.

Furthermore, it again depends on the investment product selected. For instance – stock market investments require much closer attention than fixed deposit investments but all investment products expect a regular look.

Monitoring your portfolio after a certain period keeps you aware of the trend of your returns and at the same time alerts you of any potential losses within a specific segment(s). Considering these alerts, you may choose to pull out or stay invested depending on your risk appetite, market situation and capital in question.

So, the first step that you need to take in the direction of investments is open a demat account (in case you are looking to invest in Equity, Currency or Mutual funds). To get started with that, just provide your details in the form below and we will set up a callback for you:

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