Basics You Need To Know When Investing

Investing is putting our hard earned money in any safe available financial products with an aim to get thick profit in a given period of time.

A lot of new investors enter the financial markets with the common mindset – buy when the prices are low and sell when the prices are high. But that is not enough until you have a definite investment plan.

To be a successful investor just like the legendary Warren Buffet and Rakesh Jhunjhunwala, one strictly needs to follow the footprints of these legends to get decent returns from their investments:

1. Importance of Starting Early
Investing in any financial asset is always considered even more fruitful if started at an early age. Ideal age to start investing in financial products is at the age of 24-25. It is only if started early, one can witness the magic of compounding. Starting early gives your money more time to grow, or in other words, letting your money have adequate time for compounding.

2. Invest For Long Term
Warren Buffet says “Focus on the play field, not on the scorecard”. By this, he means, the key to investing is Patience, without which, investors fail to achieve the desired goal. Most of the investors track the markets go up & down on a daily basis and count their profits/losses regularly. By doing that, such investors look only at the short-term performance, not considering the bigger picture. If the performance is not good, they get frustrated. Sooner or later it provokes investors to sell or stop their investments.

3. Stick To A Single Plan
Sticking to a single plan means not flowing blindly with the market movement as most of the investors take decisions after a certain news gets telecast on the media and end up making wrong deals. Which is because, the impact of the news in most cases already gets discounted given the fact that there are people in the market who were already aware about the news. This can be avoided by staying glued to a single plan or strategy. But then, experts believe that it is equally important to review and evaluate how the adopted strategy in order to find ways to curb losses.

4. Understand Wonder Of Compound Interest
Compound interest or compounding is an interesting concept, which transforms our money into an income-generating tool. It is the process of generating earnings or multiplying our money on presently invested money. In investments, compounding happens when an investor continuously re-invest in a particular financial product, instead of withdrawing the earned interest.

5. Diversify Your Investments
Though there are few investment choices like equities considered to be substantially lucrative than other products, but putting all of your investment in one stock or one sector is foolish thing to do. One should consider spreading their wealth to index or bond funds and fixed-income funds.

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