Thursday, September 18, 2008

Young would be investors

The Stock Market is going tumble tosser all over the world due to US economy. The sub prime crisis is finally taking heavy tolls. Many old bankers are getting bankrupt. The Indian banks are safe but the withdrawal of funds by FIIs is taking toll on its burses.

The budding young investors should take the steps carefully and stage wise. Better they follow the simple rule of saving first. Few tips I am giving here.
First of all budgeting is most important factor in young professional’s life. Unless you do that you wonder where your money goes! Writing a budget shows actually how do spend and shows the area and how you can control them. You can identify the area needs to be controlled. Never forget to add the expenses you do on shopping and entertainment and include your savings too. Keep a track on your utility bills and keep comparing them. Mind you the plastic money or credit cards are major boosters to spending. Not that they do not have any role to play. At an odd hours, god forbid, you need to meet a medical or hospital bill , then you find the credit card is a blessing. It turns a curse, when you over spend and keep repaying the bill in installments with high interest. Interest rates are as high as 42%! So, beware of using credit cards, think twice before you take it out from your wallet.
Start the saving early even it may be of smaller amount, but save it regularly. You do not know the strength of compounding. Open a recurring deposit account with any bank for longer tenure, preferably when interest rate is high, since it fluctuates off and on. Buy some mutual funds scheme under SIP (systematic investment plan), when a particular amount will be invested by you every month and this will cushion the market fluctuation. Even you can do both with as little as Rs500/- per month.
This should be starting point of any investment plan. You should set the objective like short, medium and long term. This should be adjusted to your future program, like marriage, son`s education, buying a house or car et al. Early you save better you gain later; this is specially a reality for buying insurance covers. Since lesser the age, lesser the premium and now all the insurance companies offer unit linked insurance plans besides their age old conventional plans. Better spread you investment in buying insurance cover. For basic cover go for term insurance, it may or may not have return. But with low premium it offers maximum covers. What is the amount of cover you should buy? The rule of the thumb is just six times of your annual income. As the income grows in tandem with that you should increase the amount of your cover too. These all are your primary investments. Beyond them there is wide horizon of investment market. The stock, commodity and currency markets offer immense scope of investments with its inherent risk. Learn first from various resources including sites, how to invest in the market and how the mood of market changes. Identify the stocks which are called blue chips, dark horse and penny stocks. Judge your capacity and risk appetite; then invest in stock or commodity market. Mind you slow but steady wins the race…….this old adage, still holds good for investors in the stock market.
So, bon voyage !


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