Investment guide for those starting their personal finance journey – ​Investing guide for beginners

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Investment guide for those starting their personal finance journey – ​Investing guide for beginners | The Economic Times

​Investing guide for beginners

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​Investing guide for beginners

If your financial goals include financial independence, keeping your savings in cash isn’t the way to go. Growth is absent if you do this and your money will not grow in value. If you are on the onset of your personal finance journey and are keen to harness the power of compounding, in other words ready to invest, you may not know where exactly to begin, like many millennials and young adults. Here is a beginner’s guide to investing that outlines everything new investors need to know to get started.

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​Holistic portfolio
New investors should work towards building a diversified investment portfolio that contains both defensive and growth-oriented instruments. By building a portfolio with a fair amount of defensive protection built-in, it will be easier to avoid the temptation to sell during the volatile times. Hence, your portfolio should contain a mix of equity stocks and mutual funds for growth, bonds, deposits and gold for defensives.

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​Management of portfolio

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​Management of portfolio

Before you dive into the investing part of it, think about how you wish to create and manage your portfolio. Unless you have all the free time to study the markets ever so often, learn chart patterns, analysis tools and understand the business models/working of all the companies, you may not be sure of your moves. A more efficient alternative is to consider investing in indexes and ignore the ups and downs of the market.

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​Your investment strategy

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​Your investment strategy

Your investment strategy can be based on an assessment of your own temperament to invest, risk appetite and need for control or supervision on investments. This will further help you figure out whether you want to take active part in managing route or simply leave it to the benchmark index or ETF.

Unlike actively managed mutual funds, ETFs do not try to beat the market. On the contrary, they are designed to track the market. Generally viewed as relatively safe and cost-effective long-term investments, ETFs are a solid choice for new investors. All you need is a demat account. In fact, ETFs are preferred by young individuals who are either not familiar with the intricacies of the financial markets or may not have the time on a regular basis to track them. Understand if you want to take on this type of passive approach to your investments.

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​In short, here's what you need to do

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​In short, here’s what you need to do

One need not be rich or wealthy to start investing. This is a feat anyone can do, no matter how far along the road it seems because you are just starting out. The sooner you start, the bigger your corpus will be. Put together an investment strategy you are comfortable with, stick to it over the long term and take emotions out of the equation altogether. Day-to-day market fluctuations and even major dips like the one we saw in 2020 shouldn’t deter you, make peace with that because this is how markets function. Start small, diversify the portfolio, be patient.

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