A Beginner’s Guide to Investing Money: How to Get Started + Tips for Women Investors8 minute
Lately, there’s been a lot of conversation around combating the gender pay gap. Though it might be tempting to think that a lot of progress has been made, in reality there has only been a marginal improvement. Among the many gaps that are discussed, one that isn’t is the gender investing gap. According to statistics, women are less likely to invest compared to men. In recent years, the role of women has undergone a sea change. Earlier, a woman was only restricted to the four walls of her home and every decision of hers was controlled by the man of the house who was the breadwinner. Well, times have changed, and women are now standing tall in various avenues including defence, IT, sports, finance, law, and business.
Today’s modern woman is becoming more and more independent. They’re much more aware about money matters and even demand financial independence. They are breaking stereotype beliefs that claim men do all the investing while women only handle the saving bit. Over the years, the notion that women are unwilling to invest has changed. Though they might come across as less aggressive than their male counterparts, they’ve definitely taken the personal finance planning spectrum up a notch. From stock trading to mutual funds, they’ve spread their wings to grow a fortune.
In this guide, we aim at covering important tips that will help beginner investors in India, particularly women.
Beginner Investing Guide
Even before we delve deep on the types of investments you can make; it is important to understand what investing really means. All along you’ve been working for your money. However, when you start investing, you allow your money to work for you. In simple words, investing is all about putting your money into a particular vehicle with a goal to achieve a return down the line.
Although most people consider investing in the stock market, in reality, there are plenty of other ways to invest. Many also refer to them as investment vehicles.
To build a secure financial future, saving is an important place to start. However, this doesn’t mean you leave your money idle in a traditional bank account. Though your savings account might have the same balance five years from now, the money will not have the same purchasing power and it will begin to diminish due to inflation. Instead, a faster way to build your savings is by investing them in safe alternatives that will give you more interest than your bank account. There is a common misconception that investing is a lengthy procedure that requires one to give a lot of their time. Well, the truth is that once you’ve invested your money after assessing all the risks, there is little to no involvement required on your part. You just have to sit back and watch your money grow. On the other hand, if you’re an active trader in the stock market, then you will have to buy and sell your shares based on the current conditions.
7 General Tips to Get Started
If you’re a beginner considering becoming financially independent, here are a few tips that can help you:
1. Ensure all your debts are in control:
Before you start on any investment plan, it is important to make sure all your debts are paid off completely. This will help you invest comfortably.
2. Set objectives:
When you invest in stocks and shares, it is important to set long-term objectives. Ask yourself why you need to save in the first place and what it is that you wish to achieve. Once you start investing, your portfolio will grow based on the amount of capital invested, the tenure, and the net annual earnings on the capital.
3. Keep some savings aside:
A lot of beginner investors confuse investing with gambling. Well, it’s clearly not. However, investing can lose you money. Remember, markets fluctuate and so will your assets. This doesn’t mean you will lose all the money you’ve invested but a part of it. Though most schemes help your money grow, it is always better to keep a portion of your money aside in case a particular investment instrument This will ensure you don’t have to suffer big losses.
4. Risk assessment:
With every investment option, there is a certain level of risk associated. Before you put your money into something, identify the risks of every product. The best way to find out is by doing a comparison study. Also, it is important to understand your attitude towards risk. If things don’t go as planned, is it going to make you lose sleep?
5. Control your emotions:
If you’re investing in the stock market, you have to get a grip on your emotions. You have to show confidence in a particular company if you want its share value to go up. Investors who are positive about the market are called “bulls” while their negative counterparts are referred to as “bears”. With changing stock prices, feelings of insecurity and tension are normal. However, don’t let any of your actions be driven by emotions.
6. Asset Diversification & Asset Allocation:
A fool-proof way to mitigate your risk in the market is to diversify your investments. Asset diversification is all about spreading your assets across many sectors of the market. If one area of the market falls, you will at least not be left with a sinking portfolio. Asset allocation on the other hand means dividing your investment portfolio into different asset categories including bonds, cash, and stocks.
7. Nothing happens overnight:
Lastly, an important tip a beginner investor should keep in mind is that nothing happens overnight. You cannot start investing and expect your money to multiply in a few days. As you embark on the journey to grow your money, it will rise and fall many times. Remember, investing is a long-term strategy for wealth building.
Basic Types of Investing for Beginners
For a beginner, there are many kinds of investment vehicles available in the market. We’ve discussed some of the popular ones below:
A common route most beginner investors take is investing in the share market. Individuals buy and sell stocks in publicly traded companies. When you buy shares, companies use this capital to grow or expand. They might buy equipment, pay their workers, or execute some of their pending banking activities. Since you are a part-owner of the company, you will begin to earn some profit. These profits are referred to as dividends and the sum you receive all depends on how much you’ve invested. Compared to bonds, stocks are a lot fickler. There is no guarantee either as they fluctuate every single day. However, the only saving grace is that stocks do render profits in the long run.
To be able to understand common trading terms and the working of the stock market, doing a short-term course is always a good idea.
A bond is a fixed income investment in which individuals raise money to a corporate entity or to the government. In simple terms, you are lending your money to them. In return, you get interest on the money lent and all your money back at one point. A lot of people consider investing in bonds a safe and trustworthy option since it is government-backed. However, the only downside of bonds is that they yield lower interest rates compared to other investment vehicles.
The choice is yours. You either choose between low risk and low profits or high-risk and bigger profits.
Mutual funds are a collection of bonds and stocks. When you buy a mutual fund, you become a part of a large team of investors. Once you have a team, you can pay a professional investor to choose the best assets to invest in a particular time period. The primary advantage of investing in a mutual fund is that you don’t require experience. Once you put your money in, there are professionals who will handle it for you. Since it is professionally managed, you’re bound to make some money.
Certificate of Deposit
Most beginners who have a low-risk tolerance choose to put their money in a CD or certificate of deposit. In this scheme, the bank holds a fixed amount of money for a fixed period of time such as six months, one year, or five years. In exchange, the bank issues interest. Once the certificate is about to mature, you can redeem it and will receive the money you originally invested plus the interest.
3 Reasons Why a Woman should look at Investing
The need of the hour is for women to secure their financial future. Here are three reasons why women should start investing today:
To Achieve Financial Goals
Most working women today dream of becoming financially independent. Even before you take the plunge into investing, ask yourself why you want to invest. Is it to pay for your child’s educational expenses, for a dream vacation, your own wedding, to buy a property, for your retirement, or for any other reason? When you put your money in any investment instrument, you’re in a better place to fulfill your dreams since you’re financially self-reliant.
To Achieve Financial Independence
Ever since the COVID-19 pandemic hit the world, men, as well as women, are investing in the stock market. Women particularly have realized the importance of investing. With things becoming uncertain, they don’t want the man of the house to be the sole breadwinner. It’s high time women don’t shy away from holding and operating bank accounts, DEMAT accounts, and assets in their own name. A woman can take baby steps towards investing by starting with a small Systematic Investment Plan (SIP). Once they gain confidence, they can explore bigger schemes that will help them accumulate the same amount of wealth as men.
To Ensure Stable Retirement Funds are Available
According to the World Health Organisation (WHO), women live six to eight years longer than men. This means, women need larger retirement funds than men. It is a known fact that women go to great lengths to plan a balanced diet for their families. Well, women are now planning a well-balanced saving and investment portfolio. They now want to become the backbone of their family’s financial well-being.
If you’re a beginner who is planning to start investing, right now is a good time to start. As you embark on this journey, remember the three Ps of investing – the right product, purpose, and protection. Even if you are just starting with Rs. 2,000, you can build your portfolio over time. If you want to learn more about investing, you can also seek professional advice or enroll in a trading program.