Beginning of the Investment Journey to Achieve The Financial Goals.

 Beginning of the Investment Journey to Achieve The Financial Goals

INTRODUCTION

Investing can be an adventures journey for newbies which can create a massive wealth for you to achieve the financial freedom. As early as this journey will be started you will be able to reach at the destination as faster. Whether your goals are related to creating the wealth, retirement saving or buying fixed assets to live a luxuries life you can achieve all with the help of early stage investing.

But there challenge or question always occur in the mind of newbies that from where they can start this journey of investing, where they should invest, how much to invest and other several question which do not allow them to move ahead with a free flow of actions. So here we in this blog we will resolve all these kind of concerns and give you a right road map to move ahead with the path of wealth generation.

If you are newbie, by the end of this blog you will have entire clarity of starting the journey of your investing in an effective manner. And if you are already in the investing business then you will surely be able to bush up your skill by adding something new and valuable into your skill sets.

Let’s dive in deep and get started.

INVESTMENT GOALS

As usual before starting any project or task we need to know our goal to be achieved. So here before starting the investing journey also we need to plan our goals first which will help us to prepare an action plan accordingly.

In general we device our financial goals into three parts, long term, short term and emergency financial requirements. According we prepare our action plan to achieve the same. It is always preferable to plan your investments as per your specific needs in future. It can be required for education purpose, asset buying, any luxury spending or retirement plan etc.. Once you are done with your goal setting with the required estimated amount you need for the same you can move ahead to plant your investment action plan to achieve those goals.

RISK TOLERANCE CAPACITY

Before getting into the business of investing you must know your risk tolerance capacity or ability. Every investment co related with a certain risk on capital. For example, if you cannot see any drop on your investment means you are 0 risk tolerant person then bank fixed deposits and bonds are the best option of investments for you. But the problem is in the investment markets there is a say “HIGH RISK – HIGH REWARD, MEDIUM RISK – MEDIUM REWARD, LOW RISK – LOW REWARD & NO RISK – NO REWARD” and it is an universal truth of the investment markets and you need to deal with it in an efficient manner by enhancing your skillsets.

So the conclusion is you will be required to move ahead with a right balance of the risk and reward ratio which can achieve your wealth creation goals.

To avoid the risk amount to be converted into your losses:

-           - You need to focus on the long term horizon of the investing plan.

-          - You need to work on your investment psychology which can save you from taking impulsive decision making during market volatility. Because, every mark to market loss (unrealized losses) are not the permanent losses till you do exit from your position as per the plan of action which you have prepared before getting into that particular investment. 

-          - You need to prepare the investing plan of action according to your risk appetite only.

Your targets and current capital will decide that how much risk you will be required to achieve those goals. Once you have decided that now you can think of choosing the underlying for your investments i.e. stock, commodity, currency, mutual funds, bonds, etc.

HOW TO DO THE ASSET ALLOCATION WITH RIGHT DIVERSIFICATION

So now the next requirement is of asset allocation. It should be diversified to manage the risk in an efficient manner, not all eggs should be kept in a single basket. The goat behind the diversification of invest strategy should minimize the risk and maximize the returns.  Diversification of the investment asset should be determined with your wealth creation targets. It will on decide that in what ration your asset allocation you should have in the high risk, medium risk & low risk investments. And within all these three categories also you need to maintain sub-diversification. Suppose you have certain investment in the high risk investment and it the stock market. You should also allocate that investment in diversified manner into the several stocks with a proper fundamental analysis of the company and its market trend. So if any of your stock do not perform as per your expectation other stocks performance will manage the losses of that stock which is giving you losses. Always remember we call the term HIGH RISK INVESTMENT for the stock market because nothing is certain here and that is the reason of getting HIGH REWARDS also out of it. You only need to follow a certain discipline and you will be ready to get into the ocean of wealth creation.   

WHAT ARE THE TYPES OF INVESTMENTS

Now question arise, what to invest, where to invest and what options we have to achieve desired returns.

There are many type of investment we have in the financial market. Some very popular modes of investments are as follows:

Commodities: You can directly invest into commodities like metals, agri, fuel, etc. There are exchanges which allows you invest and trade in the underlying i.e. gold, silver, copper, crude, gas, wheat, oil seeds, etc.. These are volatile instruments to be traded and require detailed knowledge to trade and invest.

Real Estate: It is a very old mode of investment. You must have heard that people use to buy land and additional residential and commercial properties to earn rental income and get benefitted by the appreciation of the asset valuation. In the modern world you have some other way also to invest in the real estate segment via bonds, real estate investment trust, crowed funding platforms, etc.. They may also give you rental income and appreciation both. Though, they will be required upfront big capital investment and involve ongoing expenses of the underlying.

Exchange Traded Fund: ETFs comes in the category of mutual fund but they trade and invest in the index like NSE, BSE, DOW, FTSE etc. They also give decent returns and try to generate better returns as compare to the respective index. And it happens due to the sound trading plans and strategies of the fund’s managing official.

Mutual Funds: One of the most popular ways to invest in the high risk market where you give your money to a professional who apply his investment expertise into the respective segment and generate desired returns for you. They deduct their pre-decided service charges which are a nominal fee on your investment. By paying that fee you can remain invested in the desired segment and continue with your mainstream job without worries of committing mistakes by the newbies in the high risk investing markets.

Bonds: Bonds are basically a loan to a company or government on certain rate of return. These bonds are generally considered low risk investing component as compare to the stocks.

Stocks: Stock is basically your share in a particular business. If business do well your investment will do well if there are concerns then your investment will also be in trouble. Though it is not that simple, in between market volatility, sentiments play its role and test the patience and psychological strength of the investor

INVESTMENT STRATEGIES

You will see that there are several strategies with general rule and regulations available in the investing business. Some of them are as follows:

-      Buy & Hold: Generally it is a very common strategy which followed by the beginners where you my buy a good fundamental based stocks and sit tight without getting disturbed with the market volatility and once your target price comes then you book profits. The same strategy you may plan for index bees, funds and mutual funds as well.

-     Value Investing: This strategy is where you look for strong fundamental based company at a best low possible price and you see future growth in the business of that company. Generally these kind investing you will be able to do when a company is in non-favorable market sentiments with strong fundamentals is available in the market.

-      Growth Investing: In this strategy you go with growth potential of the company. In this case you will also be ready to pay premium price to the market to get invested because you see a growth momentum in the stock price in coming future.

-        Income Investing: This strategy is based on doing investment from where you can generate income with value appreciation on your invested capital i.e. investing in the dividend paying stock, mutual funds and rental properties, etc.

-     Averaging or Systematic Investment Plan: With this strategy you can invest periodically a certain amount in a particular investment without getting effected by the price volatility. It helps a retail investor to face the market volatility and generate good compounded returns.

-      Timing the Market: In this strategy you predict the market movement and invest your capital with an expectation on the basis of your prediction that market will move in particular direction with in a particular time period. If your prediction comes true you generate very good returns in these kinds of strategies.

      Types of strategies are endless available in the investing market. At the end it will be helpful only to get the desired returns when you will implement your own style of investing by considering your risk apatite, financial goals, and investment psychology.  So after having a basic learning of the trading skill you should rely on your own research, knowledge enhancement and if it is not possible for you to devote time on all this due to your mainstream job you can take services from a certified financial advisor too to start your investment journey.

      CONCLUSION

     Finally, I believe that you must have got the understanding of how investing is very much important to grow your wealth to achieve your financial goals. You just need to focus on your action plan and its disciplined execution. You must be well aware with your risk tolerance capacity, your time horizon to achieve your investment goals and all these should be incorporated into action plan. Your investment diversification multiple asset class is a wise strategy to be incorporated in your action plan. It will help you to minimize your risk. You should always keep trying to stay updated with the respective news and events and keep enhancing your investing skill sets, so that you may create an edge in your investing style and that’s the thing which will create an additional return for you in the investing markets. In the high risk segment of the investing at the beginner’s stage you should consult with some financial advisor so that you may overpass the avoidable mistakes.  

     Thanks to visit my blog and reading the experiences I had in my entire journey of active investing since last two decades. I hope it will give you a good sense of investing DOs & DONTs and inspire you to start your investing journey at the earliest.  

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