IF You Fail To Plan.. You Plan To Fail..!!

Few days back on a lazy weekend I was hanging out with my friends with non commerce background (engineers). Being the only person with tax and finance background in group, i was asked about various side income opportunities. This triggered a conversation about how to start investing in share market. We discussed how the professional stock brokers and advisers pursue a layman to start investment by giving them vague and illusive figure with enough percentages to impress you. But with a proper PLAN & STRATEGY one ends up with losses and paying huge brokerage charges to the professional. So I decided to write an article and share some pro tips for the newbie and amateurs with no practical knowledge about finance or stock market . If you are the one I'm talking about congratulations mate you are in a right direction and right place.

#1 Source of your Regular Income

 Before any investment sort your income. What is your regular and stable source of income? What are your recurring expenditures and liabilities? What is the extent of loss you can absorb? (It is no secret about chances of losses in share market)

Always keep a percentage of your income as savings in cash. I personally prefer 10% of income should be kept in bank safe to face any contingency and unplanned expenditures smoothly

Investing in Shares of a company is not the only way of investing in Share market but it is one of the many ways. Being a new entry or person with no technical knowledge of stock market you can invest in a portfolio build by professional. These portfolios are known as MUTUAL FUNDS. You can track past performance of these mutual funds to be double sure about your returns on investments. 

• Types of Mutual fund :-

On Basis of Portfolio 

• Debt MF : portfolio in majority debt funds and give consistent and secure return but less than equity MF 

• Equity MF: Portfolio of investment in equity of listed companies. Highly volatile returns .

On Basis of Investment

• Monthly SIP: An Investor invests a fixed amount every month which get invested in SIP mutual funds

• LumSum : Investor invests in a MF by paying a one time lum sum money in MF of his choice

Ask yourself a Question If you are a Investor or trader. Trader: A person who invest- disinvest and rotates and circulates his money frequently (Very short term investment sometime for just few minutes or seconds ) Investor: Person who puts his money for longer period for medium or long term and is not influenced by short term fluctuation
Your Strategy: If you have sufficient time and knowledge you can become a trader as you would need to keep a constant watch over fluctuations in price to book profits and to mature an opportunity but if you are a busy person investing as a side income and cannot dedicate whole time to market then you should decide your investments as a trader 

It means in what ratio you should invest your money in various financial Instruments
My personal recommended percentage for beginners which may vary with situation and personal believes 

 10% Cash: I always believe every beginner and pro must keep 10 % as cash for contingencies 

 60 % Fixed returns Investments: 60 % of your investments in investments yielding fix returns. Debt oriented MF , Fixed deposits with banks or post offices or Saving Certificates like KVP or NSC which may give fixed return of about 7-9% p.a.

30% Equity: It means Investing directly into shares of a company of your choice. You directly purchases-sale share of a company directly. It is risky portion of your portfolio

Again Bifurcate this 30 % of equity in 70% in equity for trading and 30 % for investment (difference between trading and investments discussed  in #4)

For e.g. you decide to start with 1000 Rs. in your portfolio, then you

1.      100 Rs. in your bank as cash
2.      600 Rs. in Debt Instruments/FixedDeposit/Saving Certificates (secure)
3.     210 Rs. as investment in equity for long and medium period
4.     90 Rs. in equity for short term and experimental learning and incomes
By this strategy you can invest your money yield return and learn also in a safe manner

Whenever you buy a share always apply a Stop loss to it . It is a price below you purchase price and your share automatically gets sold to prevent and restrict the extent of loss. 

Everyday a time comes when share price dips to its lowest point i.e. share’s price falls for a while. Don’t miss that opportunity to buy share at that dip.

If you are a slow thinker or a lazy person with a confuse personality, sorry my friend equity is not a right place for you. In equity you should be very fast and clear about your approach to take quick decisions’ to secure your funds within fractions of seconds without any second thoughts or waiting for dust to settle.

Problem in stock market is that everyone wants to make huge profits within short period But the key is Trading involves emotions and investment require patienceNever panic. Be assure of your investment and never be afraid of losses and risks. Remembers even if you lose you learn something and best part is that with above suggested strategy you would be staking only a small portion of your money

Never follow any Tips, suggestions, recommendations, news trend by any professional, broker, news channel or any other source. It is a bitter fact that some people at high places plant these tips for their benefits and could put your fund at huge risks.So its better to take some time to do your own research, study books and learn basics of stock market. So Friends its never too late to start investment. Start Investing and learning today grow your small savings into huge profits. And if you like this post don’t forget to subscribe to #FinanceFactBlog . Share this post. Like and follow us on Facebook and twitter. Good Luck.