Basics of investing: Five tips for beginners

By Jasmeen Ara ShaikhWith more Gen Z individuals entering the job market and millennials showing an interest in diversifying their income sources investing is indeed the new cool The generational habits of piling up savings in lockers or creating fixed deposits have now taken a back seat as a new income class emergesmdashone thats also risktaking and techsavvyHowever starting your investment journey can be overwhelming and may seem complicated Speaking to Midday SEBI registered financial advisor Kalpesh Ashar sheds light on the basics of investing through these five tips1 BudgetingBefore you invest your income understand how you are spending it Itrsquos important to draw a demarcation between your wants and needs cutting down on frivolous expenses and avoiding the habit of borrowing through loans or tapping into bank FDs Ashar suggests defining a goal tenure and purpose for your investments which will guide your choice of financial instruments and keep you motivated to invest2 Cut procrastination Procrastination is the biggest enemy of investment The earlier you start investing the more years of returns you can accumulatemdashthats a simple mantra You can start with as little as Rs 500 monthly Its all about getting into the habit of investing and gradually building a corpus over time There is no right time the right time is now he says3 Risk management Despite the stigma attached to insurance Ashar suggests getting life insurance as early as your 20s and building an insurance portfolio A life insurance is only for the one who is the financial contributor of the family and acts as financial insurance in circumstances where your income sources may be struck down by some factor or the other Unlike health insurance itrsquos not an emotional asset and not a necessity for every family member An adequate term plan is the suggested way to proceed4 Start easy Once you have established your goal tenure and purpose its crucial to start investing your capital without further delays For someone in their 20s just starting their career Ashar suggests considering mutual funds Mutual funds offer the opportunity to invest in stocks bonds and even gold thereby helping to maintain a diverse portfolio They also enable you to participate in the capital market without direct involvement as experts manage your portfolio thus minimising risks associated with lack of knowledge and reducing mental pressure to some extent Direct investment in equity demands dedicated time knowledge and tolerance for potential lossesThe option to start with as little as Rs 500 per month and gradually increase contributions as your career progresses makes mutual funds an even more appealing option for young investorsIts essential to invest through regulated channels only5 Risk Appetite With investing comes risk Although theres no definitive answer to what a beginners risk appetite should be Kalpesh says The younger you are the more risk appetite you have because you have more career years ahead of you and more time to earn and invest However he emphasizes the need to take calculated risks and plan mindfully especially for Gen Z individuals who are often attracted to quick highreturn investments that could lead to troubleInvesting certainly cannot be learned and mastered in a day As Kalpesh puts it Saving is an emotion and investing is an art Discipline diversity and patience are key to a successful investing journey