Investing needs a lot of planning and preparation before being put in place; after all, it’s your hard-earned money that is at risk here. If you are planning to start investing your money to save for the future, here are six smart investing tips to help you in planning your investments: Understand and invest The first smart investment tip is to invest in what you know about. You need to understand and be informed, and not jump into investing without understanding what it is all about. If you are investing in the stock market, ensure that you understand how it works. Similarly, if you are investing in bonds, you need to know everything about them. Do your homework instead of blindly following someone’s advice. Have an investment plan Are you planning for your retirement or to buy a home? Decide your investment goals and then make a plan. Before you plan, make a complete list of your income and expenses so that you know how much you can possibly invest. Once you decide on the amount to invest, decide where to invest: shares, mutual funds, an IRA, or bonds. Making a clear plan not just for one year but for 5-10 years is one of the smart tips to ensure that your investments succeed. Diversify your investments Don’t put all your eggs in one basket, and diversify your investment. You can invest in stocks and mutual funds as they would give you the highest returns, but they also carry a risk. Alternatively, you can also invest in bonds that are safer and carry less risk. Keep in mind to not invest all your money in one stock or fund. Spread your money across different investment avenues to diversify and reduce the risk. This way, if one stock fails, the others can still compensate for it. Age and investing Start investing when you are young to ensure more money by the time you retire. If you start late, you may not be able to save enough. Also, when you are young, you can take more risks and invest more money in the stock market. The thumb rule is to invest “100 – your age” in equity (stocks and mutual funds). If you are 25, you can invest 75% of your money in equity, and the remaining 25% in bonds and other debt options. If you are 40, invest 60% in equity and 40% in debt. Start small You can start with a small amount to learn how it works. Even if you make a loss, you won’t be affected too much. Keep increasing your investments once you get a hang of the market. As you progress in your career and earn more, you can start investing more money. Invest long-term Another smart investment tip should be long term, for 10 or 20 years. Don’t panic if the stock market crashes or the interest rate comes down. Over a long period of time, you can definitely grow your money.
