An investment amounts to that part of the disposable income which can be put into productive instruments like Mutual Funds, Fixed Deposits, Government Securities, Equity shares or pension plans for future finance goals, unlike savings wherein the money is just kept off spending, investment accounts for compounding growth.
How can Indian citizens start investing?
1. Choose the type of investment instrument you’d want to put your money in! You can choose from stock market, mutual funds, bonds, derivatives, fixed deposits and insurance to start with.
2. For equity investments (stocks): Open a demat account which holds the securities in electronic form. You can open a demat account online by choosing a DP (Depository Participant) and uploading the relevant ID proofs and bank details or with the help of a stock broker.
3. For mutual funds: Get your KYC (Know Your Customer) done as part of account opening process. You can visit “camsonline.com” where eKYC can be completed with OTP based Aadhar verification. Once the process is complete, you can visit the respective AMC’s website and choose from the different categories of mutual funds.
4. For bonds: You’d need a demat account and a trading account with a brokerage house just like stocks. You can either buy them directly from primary markets where the bond issuer directly issues bond to the holders or in secondary markets where they’re traded once issued like shares do on exchanges. Or you can reach out to a broker.
5. For derivatives: You can do derivative trading in India through the major stock and commodity exchanges. However, a demat account is required for trading in equity derivatives. Some important factors to keep in mind before investing:
1. Identify your financial goals.
2. Analyze your investment duration.
3. Choose your risk appetite.
4. Choose the financial products which align with your risk zone.
5. Don’t invest in investment instruments you don’t understand.
6. Avoid leveraging.
7. Mind map a wealth goal of say, 50 lakh in 5 years or 1 crore in 15 years and invest accordingly.
8. Prioritize wisely, children’s education might be more important than your new swanky car!
9. Align your investment goals with debt management. Focus on coming out of the debt trap and investing small amount simultaneously for future goals.
10. ALWAYS keep an emergency fund to help you survive for 6-9 months.
