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Goals for First Time Investors

First-time investors usually have several questions in mind stemming from fear of the unknown, unpreparedness, and lack of expertise. Though it is difficult or nearly impossible to clear all the doubts, we present to you some useful tips.

Goals for first time investors
Goals for first time investors

First-time investors usually have several questions in mind stemming from fear of the unknown, unpreparedness, and lack of expertise. They continuously seek answers to questions like where to invest, how much to invest, how much profit should they anticipate, etc. Though it is difficult or nearly impossible to clear all the doubts before embarking upon the investment journey, we present to you some useful tips which can make things easier for first-time investors.

Define your goals.

Before you start, ask yourself as to what would investing make available for you. In other words, we must invest keeping in view the life goals that it will help us achieve. These goals can be short term, medium, or long term and may take different forms like buying a car, owning a house, child’s education, child’s marriage, plan for retirement, etc. You should identify SMART goals i.e. your goals should be specific, measurable, attainable, realistic and time-bound. Your investment goals provide critical insights about investment amount, investment tenure, investment products, risk tolerance, liquidity requirements, etc., and hence make the entire process very effective.

Train yourself.

It’s very important to continuously train oneself so as to gain clarity about the products one is investing in and also understand the risks they carry, their returns generating potential, their lock-ins, associated charges, etc. The information can be accessed via books, newspapers, online articles, or through financial advisors.

Know your risk appetite.

It is obvious for new investors to panic if their investments start to show losses soon after they invest. So, it is highly important to understand your risk appetite and the risk profile of the investment before starting to invest. If your risk appetite is low, you may avoid higher exposure to risky investment avenues like direct equities or their derived products and rather explore opportunities in low-risk avenues like recurring deposits and debt investments.

Start slowly.

It’s advisable to avoid rushing into any investment when you start for the first time. Don’t go by what you think should be done or what you see others doing. Investment should rather be strictly attached to your financial goals. So, one should start slowly and gradually increase the exposure so that the investment can help achieve the goals in time.

Diversify your investments.

As a novice, some investments may look attractive while others may seem boring. Every investment product has a distinct purpose and it helps in achieving specific financial goals. Thus, one should not put all money in one class of assets though it may excite you initially. Rather, diversify your investments across different types of instruments in varying asset classes and risk profiles, offering a hedge while generating decent returns.

Don’t invest just to save on taxes.

One should aim to invest to meet their financial goals while also exhausting the tax-saving deduction benefits at their disposal. Investing only to save taxes might generate inadequate returns or involve long lock-ins which might hinder one’s journey to meet their financial goals well in time.

Don’t borrow to invest.

It’s always better to invest out of the money one has earned and saved after meeting one financial obligation. Avoid borrowing money for investing purposes. It can put one at risk of a debt trap if the investment goes wrong. There is nothing wrong with starting with a small amount when investing for the first time.

Start early and invest regularly.

A stitch in time saves nine. Some people delay their investments thinking they will start once their income grows. This is where they go wrong. It’s always better to start early. A regular investment with a small amount can grow very big if one starts at an early age compared to an investment of a greater amount that one plans to start at a later stage of their life. By investing early, one allows more time for their corpus to multiply with compounding benefit.

Review your investments regularly.

A periodic review helps to identify the mismatch and to make the revisions so as to realign investments with one’s financial objectives.

A penny saved is a penny earned. – by Benjamin Franklin

Dr Swati Dhawan
Dr Swati Dhawan

A SRCC & FMS alumni, Dr. Swati Dhawan has a rich teaching & training experience of more than 17 years in the area of Accounting and Finance with institutes of repute like IIM Rohtak, IIM Raipur, IIM Sirmaur, Faculty of Management Studies, Shri Ram College of Commerce, IMT Ghaziabad, TERI University, etc. Also, she has been an academic consultant & corporate trainer in management development programmes at GAIL and Alchemist. Her book on Merchant Banking & Financial Services has been published by McGraw Hill.


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