Despite the brevity of my investing journey, sharing it has taught me some things. There are plenty of opportunities in investments and I have elaborated in my short story here on “A Short story about Investments”.

Looking back, I remember the day I joined a big MNC, as a software developer with a good salary. Investment sort of wasn’t in my zone at that point. Having grown up in a middle-class family, investments were limited to gold, property, and maybe a fixed deposit for savings. The stock market? Now that is a whole other story, a nightmare. You can sense the fear of putting it all on the line with the stock market. However, once I entered the corporate world, opened my eyes to the world of investment and opportunities available, although this journey is very short.

What is investment?

Investment is putting money capital into any kind of asset or thing to get up income or profit for the long term. These can be stocks, bonds, real estate, or opening a business. Capital appreciation — being and foremost everything should create wealth and make a plan to grow capital. Of course, different investments carry different levels of risk or potential return, so do your homework and always align your investments with your financial goals. Essentially, to invest means to work for the money and generate lasting results.

Key Points to discuss:

• Don’t jump and dot it
• Investment objectives and purpose of investing.
• Where and How to Invest
• Investment vs Speculation
• What is the difference between savings and investments?

DON’T JUMP AND DOT IT:

I started investing in stocks knowing only a tiny bit — my stock-picking process consisted of checking 1-year and 3-year return graphs — if the line was heading up, I buy, if not, don’t bother. Sounds strategic? Not quite. Similarly, even I also invested in mutual funds based on SIP of Rs. 100 without considering the expense ratio, exit load, and tax consequences. I had been investing for several months when I opened my portfolio to see the returns below zero. It is not the life-changing money I imagined. I learned the ins and outs there.

INVESTING FOR WHAT — OBJECTIVES OF INVESTING :

It is important to know your “why” and what is driving your investments before you jump into investing. Are you investing with your retirement in mind, purchasing a house, sending your kids to school, or just accumulating wealth? Goal setting leads to execution, and without execution, you would never arrive at your investment strategy. Also, see what your financial status is so you can know how much to invest and for how long. Anything that promises fast profits is a scam in my opinion; returns only come from waiting. Short-term and long-term goals will lead you to the right decision in the investment and to diversify your investments.

WHERE AND HOW TO INVEST:

To this is deciding the investment – Shares, Mutual Funds, Gold, Securities, crypto, and so forth.

• Stock: A stock is a share in the ownership of a company that represents a claim on part of the assets and earnings of the company in India. Owning a stock means owning a piece of that company. Buying and selling of shares takes place at stock exchange platforms like the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Investors buy shares in hopes they will rise in value and may receive dividends (also a payment being taken from the business profit and divided among the investors). While stocks can provide a good deal of growth the dangers of stock investing are always the up-and-downs of the market.
• Mutual Funds: These funds are a combination of many investors who buy a diversified portfolio of stock, bonds, or other securities. Mutual funds are managed by professional fund managers and these are perfect for people who want a hands-off type of investing style. Systematic Investment Plan (SIP) is a disciplined way of investing in mutual funds through a fixed investment amount at regular intervals.
• Gold: A traditional and safest way of investment where Gold is considered as an inflation hedge and currency volatility hedge. Gold can be bought in the form of physical gold, gold ETFs, Digital gold, and gold mutual funds.
• Bonds: Bonds are the debt securities issued by the corporation or government(T-Bonds). If you purchase a bond, you are providing an alleged loan to the issuer for the Period, anywhere from 1 year to 10 or more relying on the bond. In return for monthly or annual interest payments plus the repayment of the bond’s face value at maturity. Bonds are regarded as a safer investment than stocks, and in general, they provide lower returns.
• Cryptocurrencies: High risk, high reward by way of Bitcoin or other digital or virtual currency.
  

  IMPORTANT: This is a very volatile market, make sure to know how to trade it properly first!

You can mitigate risk through your stock portfolio by investing in several different stocks instead of just one sector or type of stock. Try to research and diversify the portfolio as much as possible to reduce the risk. In this manner, one performance will not hit your portfolio. Follow market trends and find out everything there is to know about economic trends and growth and make an educated choice.

INVESTMENT VS SPECULATION:

Speculating on an asset for the long term just based on guesswork and expectation that it will return highly might not be the best approach. But speculation is gambling, though. Speculation may do better with higher profits but is just as risky and unpredictable. Sustainable growth — the sort that intelligent investors are attracted to — ultimately revolves around stability and informed decision-making.

DISTINCTION IN SAVING & INVESTMENTS:

Savings is the allocation of money for short-term needs or emergencies that can be considered a low-risk, liquid, demand-deposit account. Investments are usually meant to grow wealth over a period which is greater in the case of stock-gains. Savings give little growth but assure security and investments give too much high growth but demand high risk. Investing demands a wise decision and patience. Understanding trends of the economy and improving your strategy to work for your money.