Questions which the new investors frequently ask

New investors of modern age want better returns, but they are in doubt. Various questions come to their mind regarding investment. This is quite natural. In this article, the author tries to answer five frequently asked questions by the new/first-time investors. Read on.

Nowadays many young people have been planning to invest in various investment instruments both in equity market and in bond market. They do not remain satisfied in investing in PPF, Post Office Savings Scheme and other such traditional investment instruments. They go for higher return. This is quite desirable because to beat inflation, investor must invest in equities and in debt mutual funds, which give better return than traditional investment instruments. However, the first time investors always remain in doubt. Before investment, various questions come to the minds of first-time investors. In this article, we are going to discuss five common questions which a first-time investor generally asks. The ideal answers to these questions have been attempted. It is felt that these answers would clear some doubts from the minds of the new investors.

Question No.1: How do I understand the nitty-gritty of investment? Where should I invest?

Answer: Many of us believe that investing has just one purpose. But investment must be made keeping in mind various personal goals which may have different time-period to achieve. For different goals, we must invest in different investment instruments.

Question No. 2: I want to invest but I need to plan. How should I plan for my future?

Answer: A good plan is one which helps a prospective investor to achieve a good balance among various requirements and gives the investor a series of actionable steps which he/she should take. Plans can be very detailed and take up a lot of time. So, we must prepare an easy-to-follow plan which is not very complicated. But at the same time, the plan should take into consideration every related factor.

Question No. 3: I have just started my career and I want to start small. I also don't want to risk the savings which I have. What should I do?

Answer: The experts give a simple answer to this very pertinent question. At the very beginning, a new investor must start investing In a debt fund. Although debt funds are not risk-free, these have much less risky an less volatile than equity mutual funds. On the other hand, these debt funds give better returns than Provident Fund or Fixed Deposits.

Question No. 4: Experts always say that investing is for the long-term. Why is it so?

Answer: Investment should be made both for long term and short term. This is entirely goal-based. When the goal/target is required to be achieved in less than three months, excessive volatility is not desirable. For goals which are more than 5 years away, we must invest in equities or equity-related instruments, to enable getting better return and consequent creation of wealth.

Question No. 5: Everybody advises to start an SIP immediately without timing the market. What are the real benefits of SIP?

Answer: Systematic Investment Plan (SIP) is a way of saving and investing a sum of money each month over a period of time. It is like a recurring deposit of a bank. SIP enables an investor to build a portfolio over a longer time horizon with small investments at regular intervals reducing the risk of market volatility. An investor can choose between quantity based and amount-based SIPs in stocks, mutual funds, exchange traded fundss and gold. SIPs provide better returns at lower risk than other investment options. Investing in mutual funds via the SIP route is considered the best way of achieving financial freedom over a period of time. SIP automatically takes care of market volatility by averaging the investment.

Final words of advice

In a nutshell, financial experts recommend goal-based investing through SIP route for the new investors. Systematic and regular investment would definitely enable them to achieve all their financial targets.

Article by Partha K.
“Those who will not reason, are bigots, those who cannot, are fools, and those who dare not, are slaves.” - George Gordon Byron

Follow Partha K. or read 281 articles authored by Partha K.

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Author: Umesh07 Jun 2017 Member Level: Diamond   Points : 2

The first time investors are confused regarding investment. Some of them think that they will save after some time when their salary is increased. As they are not aware about various schemes they fall prey to touts and cheats also.
Anyway the article has nicely explained the need and the way how to invest.
I want to mention that investment is a life style and it is to be continued and maintained with the same zeal as we have for our spending. In that way only the investment will turn out in a comfortable kitty for one's old age or rainy days.

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