How can I learn the basics of investment in the Indian share market? Going into this, one thing that I want to start with is to say how important it is for every one of us to learn how to invest wisely.
To understand just how much of a difference an investment can make in our financial lives, just consider the following: someone making a $50,000 investment in the cost base of Google over the course of 30 years in the same order. The company growing at about 30% per year can offer a rewarding reward for the investor.
The bad news is that there is a high risk involved too!
Again, we are talking about diversification here because our investment will depend upon how the other investments perform!
Also, don’t forget there are financial advisors that will handle allocating your funds to the stocks of different companies so that every investment with the same name has his/her priorities set correctly for your objectives.
Let’s say that we have decided to invest in the company through the Dividend Oriented ETF (DAA) of the first sector that we see as follows:
Going from figure 1: The equities sector has the most weight, followed by the Consumer Staples and then the Communication, Industrials, Consumer Discretionary, and other sectors have the rest of the weight.
So, with the sectors, as follows, we can start, and I won’t have to worry too much about anyone sector where my investments might not turn out to be good!
Now what I think is key for individuals is for us to understand the different elements of a healthy investment strategy, and consider different stages of our investment lifecycles, so we can focus on investment with a long-term horizon.
Figure 2: Let’s see how each one of our choices would look if we change our mind after a given period of investing in our first portfolio.
Figure 3: I won’t have to worry too much about retirement funds either as the latter can be easily shifted to another stock if that is required.
Finally, as long as we choose investments well and achieve the intended objectives over time, no issue will surface!
What Can I Learn from the Basics of Investor Management?
Even if you are relatively well-off and have a strong investment habit in terms of your initial actions in life, the first step when we think about investment is that we need a clear understanding of what we are doing.
To come up with something more insightful to decide your strategy, we need to think through each level.
The more complicated it is, the more complex and it is becoming a bigger mystery.
This can be very frustrating when we don’t get the answer that we were expecting.
As a result, we get very anxious to change our choices even if we have been convinced of the right direction in the past.
The clarity we are going for will enable us not only to figure out where to start as an investor but also what to get the most out of over the long run in the investment process.
In order to find that clear direction, we can actually go back to your financial background and see how you invested in your early life years.
Does your bank or bank account seem like this?
Does your house look like this?
Does your tax return look like this?
After that, we can go back to some other important sources of income and see how you started.
Are you worried about the impact of COVID-19 as a financial impact?
And, do you worry about the drop in your discretionary income?
These are a few important questions to ask in order to get a clear view of what the right options are for us.
Even if we look at our current investments, having a clear knowledge of our objectives can help us cope with the shorter-term investment portfolios of different short-term trends better than our peers!
After having a better understanding, it makes us more confident to make informed decisions about our investment portfolios.
Creating diversified portfolios, making the right allocation decisions, and taking care of our emergency funds can help us if any threats of COVID-19 or other unforeseen outages hit us in the near future.
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