Why. I am 22 years old and have managed to save some funds out of pocket money during my time in college and convert it into fixed deposits. Yet, in recent times with banks offering very low interest rates, my money is not growing. How do I enter the financial market and importantly, where do I get specific knowledge regarding investing as a beginner?
a. It is good to diversify your investments across asset classes. And if you do not need the money in the short term then you must invest in market linked instruments like mutual funds. Stocks can be the next step if you are willing to track the markets closely. As with mutual funds, start with simple equity index funds that passively track the market. That way you don’t have to do much research on which fund or fund manager is doing well or worry about the wrong products being sold with high commissions. If you are committed to not touching your savings for at least seven years, consider 60-70% in equity index funds (like Nifty 50, Nifty 500, Next 50 and so on) and the rest either like PPF In traditional options or in debt mutual funds, especially in short duration and corporate bond funds.
Make sure you do regular monthly SIPs on these funds to navigate the ups and downs of the market. You can read this article to get more clarity on how to invest in the market. Visit https://bit.ly/InvestmentBeginner or scan the QR code that appears with this article.
On building knowledge – both reading and investing will help. You can consider reading books like talk about money by Monica Halan, money wise by Deepak Shenoy You Can Get Rich Too: With Goal-Based Investing PV to learn the basics of money and financial planning. by Subramaniam and M. Pattabirman. You can refer to Mutual Fund (MF) websites to know the basics of MFs.
Why. I am 28 years old and self employed. I have started developing an interest in the stock markets and have been learning since the pandemic started. I couldn’t help myself looking at the sudden increase in public interest in Initial Public Offerings (IPOs). However, research efforts done through internet tell me that some experts consider it unsafe without proper knowledge to go for these offerings.
So, what should we be aware of before applying for an Initial Public Offering?
a. IPOs are seen as a source of quick funding in a bull market. But popularized by new investors for such bull market confidence, past IPO figures show that the money effect wears off over time. If you are really interested in investing in an IPO, you need to get the following three combinations right: One, you need to find a business that is scalable and can generate income and is stable. generate cash flow. Second, you need to identify such a business at the right time – when it is growing. Three and the most important thing – you need to buy it at a reasonable price/valuation which should provide enough profit for you.
In stocks that are already traded in the secondary market, getting possession of all three can be difficult but very possible. It’s not easy with an IPO. For one, your understanding of the company making the public offering is limited to what is stated in the offer document or prospectus.
Here, the said performance record is limited. Two, in terms of timing, there is more time for IPO promoters or private equity investors to offload their bets, when one sector is most favored (such as a chemicals or e-commerce IPO in 2021) to get you a business on the right. allows access to. , the opportune moment.
Third, since the people exiting the company during an IPO want maximum value, it is not easy to determine the actual pricing for an IPO – except for the real long-term upside. You will see that IPOs of brands like Policy Bazaar, despite listing gains, have slipped below the offer price, unable to sustain the profit! So, if you’re lucky enough to have all three of these rights, an IPO makes sense. Otherwise, they are more lotteries!
Why. I am a 32-year-old Air Force employee with nine years of service left. I want to invest around ₹5,000 monthly in the stock market for my one year old daughter. Please advise.
a. First of all, thanks for your services. We are glad that you are starting to invest early for your daughter’s future. Since you have a girl child, consider a product like Sukanya Samriddhi Yojana by the government. It can be around ₹2,000. For the rest, start investing in equity mutual funds – index funds like Nifty 50, Nifty 500, international indexes like Nasdaq 100. Use Systematic Investment Plans (SIPs) and ensure that you do not disturb the corpus for at least 7 years. As your income increases, increase your SIP value. Set aside the lump sum amount you get to save in an FD for any school expenses you start in the next few years.
(The advisor is Co-Founder, Primeinvestor.in)
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