Guide For Investors
Guide For Investors
Welcome to your Journey of Creating Wealth
The key to achieving your wealth creation goals is to empower yourself with the right knowledge and its use. Creating wealth for the long-term can be simple when an expert holds your hand through the process.
Given your life stage, your life's and financial goals may vary. From higher education to a wedding, child's expenses to retirement, planning investments for each stage is important.
Whether you are investing for the first time or reviewing your existing portfolio, this guide helps you understand why investing matters, how to begin, and the precautions you should take.
A common question that often arise is Where do I invest money?
Why should you invest?
- To maintain steady value on the money you have saved.
- It gives you an additional source of income besides salary / business.
- It helps you to create wealth over a period of time.
Inflation is another important reason to secure your financial future. Inflation causes money to lose value. Inflation is the rate at which the cost of living rises, making it expensive to buy goods and services to meet your daily needs. This is because with inflation, a value of ₹100 today will not buy the same amount of goods or services in the future as it does currently, or as it did in the past.
For example if you invest 100 in a fixed income asset that gives you a nominal return of 5% in a year. Your total money after earning returns become Rs. 105. Assume that the inflation rate is 6%, due to which the cost of goods and services have gone up by 6%.
Because of which your real return turns out to be actually negative (i.e. -1%). Meaning you can now buy fewer things with Rs. 105 vs. that you could do it earlier with the original Rs. 100
The example above illustrates how inflation can erode the purchasing power of money over time. Regular investing, combined with returns that outpace inflation coupled with the magic of ‘Power of Compounding’ can help protect and grow your wealth in the long run.
When should you start investing?
The three golden rules of investment:
- Invest early
- Invest regularly
- Invest for the long term
Furthermore, an investment's 'real' rate of return — the return after inflation — must be considered. The return on investments should be above the inflation rate to ensure that the investment does not decrease in value.
That is why it is important to explore suitable investment options for your goals and understand the power of compounding — where your returns generate further returns over time.
What care should you take while investing?
- Get all the documents pertaining to your investment in order.
- Read and understand the rules and regulations before you invest.
- Verify the legitimacy of the investment.
- Find out the risks and benefits associated with the investment.
- Assess the risk-return profile of the investment.
- Know the liquidity and safety aspects of the investment.
- Ascertain whether it is suitable for your investment goals.
- Compare these factors with other investment opportunities available.
- Invest only in products that you understand.
- Invest only through an authorized licensed intermediary.
- Clarify all your doubts before you invest.
- Do not sign any blank or incomplete forms.
- Check your investments regularly.