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Investment professionals are always quick to offer advice about how to successfully invest in India’s stock market. Unfortunately, many people blindly accept the advice of so-called professionals without doing any research of their own. Investing is a two-way street; you need to strike a balance between good advice and pursuing investments that are right for your current situation.
Here are some tips that will offer some guidance to investors of all levels – from inexperienced to individuals who are more savvy:
Consider Tax-Saving Mutual Funds
In India, you can choose to invest in equity linked mutual funds (ELSS) which offer rebates to the investor depending on how much capital you put in. These are also known as tax saving mutual funds.
These funds provide a tax rebate if you invest up to 1.5 Lakhs. There is a three-year lock-in period, but many investors choose to stay in these funds beyond that time period.
There are many different types of ELSS funds, so the investor needs to choose carefully. Many have diverse portfolios that span many business sectors, and others choose to stick with securities, or historically stable companies that provide medium to long-term growth. Do your homework before choosing one to ensure that your money will be invested wisely.
Know Your Expectations
When investing, you can choose to go with riskier propositions, or ones that will provide financial security later in life. Younger investors typically go for riskier investments such as equity-linked mutual funds described above, real estate or technology stocks that can be very volatile. If you cannot afford to lose the money you are looking to invest, choose more stable options that will not jeopardize your financial well-being if riskier ones don’t pan out.
Avoid Investments Promising Unrealistic Returns
Most legitimate investments promise a reasonable return of a few percentage points above your initial outlay. Then there are those that promise unrealistically high returns that could not possibly be delivered. The best rule of thumb to go by is if something sounds too good to be true, it probably is.
Determine Your Need For Liquidity
The ELSS funds we spoke about earlier require a three year lock-in period, which means you will not have access to the money you invested. Before considering any investment, you need to determine how “liquid” you need your funds to be.
The most secure investments will tie up your money for long periods of time, and will not allow you to access it without a significant penalty. Short-term investments offer greater access, but risk might not necessarily mean reward.
Don’t Worry About Short-Term Fluctuations
Some of the most rewarding investments take time to achieve their goals. Watching fund or stock prices on a daily or weekly basis is a sure-fire way to rattle your nerves about the money you’ve invested.
Experienced investment professionals will tell you that it takes at least one year to see a return on a sound investment, and keeping an eye on short-term price fluctuations is not a good idea. World events and other factors can cause market corrections that can worry investing novices, and the best thing to do is pay as little attention as possible. Sites such as Money Bhaskar shares many market tips in Hindi. Visit the site for more.