Basics of investment – What the first time investors need to know

Are you amongst those who are making investment for the first time? If yes, you need to know about investment basics properly. If you’re investing in bonds, stocks, mutual funds or any other investment plan, then you are taking an important step in planning your future growth. Make sure you choose the right investment for yourself so that you may get good return with it.

Some tips you should follow as a first time investor

Read on to know some tips you should follow when you are investing for the first-time.

• Health insurance and savings for emergency – Before you begin investing, you should be sure that you have sufficient health insurance and emergency savings for you and your family. This is because investment is meant for increasing your leftover in the long run. Once you make investment, you cannot take back the money before the maturity period. Thus, it is always better to have adequate emergency savings and a health insurance before you begin your investment.

• Set your objectives and assess your finances – You must assess your finances from time to time. This way, you’ll be able to get a clear idea about the money you’ll require achieving your goals and the amount you can invest with time. Be clear about your present financial condition and plan your objectives such as education fees, vacations, down payment for home loan, home repair, car purchase, saving money, retirement savings, etc. These will help you plan your investment.

• Work out your time-frame – You will have to fix a time-frame that is practical and sensible depending upon your investment goals. So, if you’re making a short-term investment, it should be of 1-2 years, for medium-term, it should be 4-5 years and for long-term, it should be of 7-10 years. So, if you fix a time horizon for each objective, it will help you find the amount of money you require to invest every month.

• Select your investment option – You will have to choose your investment option that will suit your investment planning. It must be based on the time horizon to attain your objectives. See some examples in terms of goals. If you are investing for holiday vacation, then it is a short-term goal of 1-2 years. If you’re investing for down payment or child’s education, then they are medium-term goals. In case of retirement planning, you may invest for a period of 10 years or more than that.

• Diversify investments very carefully –While thinking to invest your hard-earned money, you should always consider diversifying the investment risks. This means reducing the risk by making investment in various assets. Thus, if one of your investments does not perform well, the other investment plan can secure your principal amount with good returns. Mutual funds are considered to be the best option for increased diversification. Being a first-time investor, it is better to invest in a mutual fund that is handled efficiently.

Thus, the above-mentioned tips will help you accumulate reasonable amount of money so that you can satisfy your future requirements.