How To Become An Investor In India  – A Beginners Guide

“How to start investing” is a question people often ask when they begin investing money even before “How to become an investor in India”.  Whether you’re investing in stocks or simply looking for the best mutual fund investments,  this is a good question to ask. 

While we all want to invest money,  only a few of us understand how to invest and even fewer have an investment plan.  In this piece,  we’ll explain how you can start investing and also share investment tips for beginners. 

Why Start Investing?

There are many types of investments available today.  Some people like investing in stocks,  others prefer mutual funds.  But why do people start investing? After all,  it requires effort,  discipline and patience. 

Well,  everyone who wants to secure their financial future should consider investing.  This is because as inflation rises the value of your money keeps reducing.  While the percentage of inflation may seem small to you it has a brutal impact on your savings. 

Now that you know,  why you need to start investing let’s understand what is an investor. 

What Is An Investor?

An investor is a person who puts their funds or a portion of their money into a specific account,  business venture or other financial assets to receive long-term economic benefits.  

There are two main types of investors—institutional investors and retail investors.  Institutional investors generally invest in large corporations or organisations,  whereas retail investors invest based on their preferences,  choices and funds. 

How To Become An Investor?

Here are the steps that explain how to become an investor:

Start early

To invest in revenue-generating assets or financial resources,  start early.  Educate yourself about investments and funds to make informed choices.  Seek professional advice from a colleague or financial manager.  The compounding effect can lead to higher returns on reinvested earnings.  Starting early maximizes your potential returns compared to starting later. 

Identify your requirements

Every individual has different requirements and goals for starting investments.  Knowing why you want to start investing can help you understand your motivations and guide informed decision-making.  

To continuously make intelligent investments,  you can benefit from identifying your long-term goals and how you are going to use invested funds in the future.  Knowing your requirements and motivations can help you gain clarity on investing. 

Choose your investment product

The financial market offers various investment products to meet your needs.  These include mutual funds,  equity shares,  PPF,  ETFs,  bonds,  and currency.  Understanding these products is crucial for making informed investment decisions and maximizing long-term returns.  Each product has its own complexity and risk level,  so learning about them is essential. 

Assess your risk capacity

Understanding the risks associated with investments is crucial before you invest.  People have different risk tolerances,  and knowing the fundamentals and market trends can help you make informed decisions. 

Plan your investment

Diversifying investments is crucial to minimize risks and maximize returns.  Plan strategically based on your goals,  research options thoroughly,  and analyze associated complexities and risks.  Invest time and effort into researching the right assets for favourable options. 

Invest consistently

Consistent investments in financial products can generate future income.  Researching companies and products helps align decisions with your values and financial goals.  High-return investments contribute to responsible investing.  Don’t worry about the initial investment amount; it can grow over time. 

Get professional advice

Financial experts and advisors guide intelligent investments based on your history and portfolio.  While their advice can make you more informed,  it’s important to do your research and analysis.  Some guidance may be general and not tailored to your needs,  so consider consulting other professionals before making a decision. 

Educate yourself

Investment requires constant learning and focus.  Educating yourself on market trends and practices can help you grow your income and capitalize on assets.  Improving your strategies,  practices,  and mindset ensures you stay updated on profitable options and don’t miss out on beneficial opportunities.  Learn concepts from basic terminology to specialized investment levels based on your requirements. 

Evaluate your portfolio

Regularly evaluating your investment portfolio helps identify areas for improvement.  Different types of investments require varying levels of monitoring.  Regardless of complexity,  all investments should be monitored to track performance and guide long-term strategies. 

Investment Options in India

The investment landscape of India is highly diverse,  with a range of options for different types of investors.  With ever-increasing costs of living,  it has become important to save and invest your funds to stay ahead of the inflation rates and ensure a financially independent future for your family.  Here are some investment options in India:

Fixed Deposits (FDs)

FDs offer a fixed return on your investment at a fixed interest rate over a specified period.  They are primarily offered by banks,  providing a safe haven for conservative investors.  With Fixed Deposits,  you can choose the tenure and interest payout frequency that suits your financial needs. 

Public Provident Fund (PPF)

The Public Provident Fund (PPF) is a government-backed investment scheme that offers attractive returns along with tax benefits.  It has a long-term tenure of 15 years,  making it an ideal choice for individuals looking for secure and tax-efficient investment options.  The interest earned on PPF is tax-free,  and the invested amount is eligible for deduction under Section 80C of the Income Tax Act. 

Equity Mutual Funds

Equity Mutual Funds provide an opportunity to invest in the stock market indirectly.  These funds pool money from different investors to invest in a diversified portfolio of stocks.  They are handled by professional fund managers who aim to generate high returns over the long term.  They are ideal for investors with a higher risk appetite and a long investment horizon. 

Real Estate

Investing in real estate has been a rewarding choice for wealth creation in India for decades.  It offers potential capital appreciation and rental income.  Real estate investments can range from residential properties,  commercial properties,  land,  or even Real Estate Investment Trusts (REITs).  However,  it is important to conduct thorough research and due diligence before investing in real estate. 

Gold

It provides diversification  to an investment portfolio.  You can invest in gold in different forms,  such as physical gold (coins,  bars,  jewellery) or gold Exchange-Traded Funds (ETFs).  Gold prices are influenced by international market trends,  making it a viable investment avenue. 

Bonds and Debentures

Bonds and debentures are debt instruments issued by corporations and government entities to raise capital.  They offer fixed interest payments and repayment of principal at maturity.  Bonds and debentures provide a steady income stream and are suitable for risk-averse investors.  It is essential to assess the creditworthiness of the issuer before investing in bonds and debentures. 

Stock Market

Investing directly in the stock market provides an opportunity to own shares of companies and participate in their growth.  It requires a thorough understanding of the stock market,  company fundamentals,  and market trends.  Stock market investments can deliver substantial returns,  but they also carry higher risks.  It is advisable to seek professional guidance or conduct in-depth research before investing in individual stocks. 

Systematic Investment Plans (SIPs)

They enable you to invest a fixed amount at regular intervals (monthly,  quarterly) in a mutual fund scheme of your choice.  This investment method reduces the impact of market volatility and enables you to benefit from rupee-cost averaging.  SIPs are suitable for investors looking for long-term wealth creation. 

Unit Linked Insurance Plans (ULIPs)

Unit Linked Insurance Plans (ULIPs) offer a combination of life insurance and investment.  A portion of the premium paid towards ULIPs is used to provide life cover,  while the remaining amount is invested in various funds such as equity,  debt,  or balanced funds.  ULIPs provide flexibility in choosing investment options based on your risk appetite and financial goals. 

FAQ: How To Become An Investor In India

What are good investments for beginners?

Fixed Deposits,  PPFs and Mutual Funds via the SIP route are good investments for beginners. 

How much money do I need to start investing?

You can invest any amount over Rs. 500 if you’re investing through a systematic investment plan.  Any amount you invest is an investment but a good investment is one that is made after consulting an expert or doing ample research. 

Do investors earn profit?

When you invest your money,  it hopefully earns returns,  and then the returns you’ve earned can also earn returns of their own.  This can also go the other way during down markets,  but over the long term,  markets have historically trended upward. 

Conclusion

Becoming an investor in India may seem like a daunting task,  but with the right knowledge and guidance,  it can be a rewarding journey.  Investing is important because it allows you to grow your wealth and achieve financial goals.  

As a beginner,  it’s crucial to understand what it means to be an investor and the various investment options available in India.  Whether you choose stocks,  mutual funds,  real estate,  or other investment avenues,  it’s essential to do thorough research and seek advice from experts in the field.  

Remember,  investing is a long-term commitment that requires patience and discipline.  So,  take your time,  educate yourself,  and start your investment journey today.  Happy investing! Read More – SustVest