It is sometimes hard to believe that we still live in the same world where not so long, mutual funds were considered “incomprehensible”, life was a lot simpler with a fixed plan in every student’s mind when they entered graduate school.
The common ingredients to this recipe of a successful life usually consisted of studying hard, working for a well paying job, building a comfortable home to call your own, saving some money for the rainy day and putting some away for the kids when they came along.
In the face of today’s economic meltdown, one would happily trade the present stress for the mindset of the past!
Gone are the days of corporate pension schemes and health security programmes. With the rise in pay packets, the worries too seem to be mounting and the only way to secure a safe future is to –Invest Early. The logic is this. The more you work, the more you may get paid. However, there is a limit beyond which you cannot work. So for all you readers out there, get smart and send your money to work for you instead. This is what an investment does.
Investing early too comes with its own risks and ironically if done wrong, may not in fact provide you with a safe future at all! So what advice would one give a young blooded investor who has jus earned some pocket money on his first job as a waiter at McD’s or as a teaching assistant.
The first beginners’ investment mantra is always “Play Safe”. The first investment must always encourage the investor to put in more money cautiously and must definitely support the beginner’s luck theory. When an investor faces loss in the first investment, his ill feelings spill over to his future investments as well and he may always remain bitter or worse, unsure about putting his money to work.
The second tip is to make your investment a habit. Invest less and more frequently. Like he famous saying goes, ‘The sea too is made of drops of water’, frequent small investments in intelligent deals will provide a handsome repayment. Ensure that money can be directly transferred from your bank account to the investment account so that you don’t delay investing simply because you don’t have the time.
The third advice for beginners is to have investments that are hard to liquidate. This however does not mean poor returns. Instead, to keep your hands off from selling your investment and buying yourself a gift, you must develop the habit of allowing the investment to grow. Tax disincentives and administrative hurdles are good obstacles for selling your investment.
The fourth and he fifth important tips are to invest in an instrument that is easy to understand and low risk. The low risk component will ensure that you are not disappointed with your return on investment (ROI) and the transparency will ensure that you understand your investing fundamentals right. These are the fundamentals that differentiate the smart investor from the fool.
