Boring’s Better Than Flash In The Pan

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Boring’s Better Than Flash In The Pan
Boring’s Better Than Flash In The Pan
Varun Girilal - 28 December 2021

The right investing habits are not about being miserly; it’s about creating funds for the things you enjoy such as travel, sports, etc.

1) Invest Before You Spend: Start with automating your investment allocation before you spend. Being able to save at least 15-30 per cent of post-tax income is ideal but you can also start with as low as Rs 1,000 per month. Stay clear of the aggressive marketing and temptations that come from credit card and buy now pay later (BNPL) schemes.

2) Protect Before You Invest: High-cost insurance plans hard sold as investments with long-term lock-ins are best avoided as you get started. A medical insurance plan for yourself and your parents if they are dependant on you is good to have.

3) Set The Right Goals: Your first milestones could be around building an emergency kitty covering six to nine months of expenses and also saving and building your first few lakhs. The confidence and satisfaction that comes from setting a goal and achieving it with a disciplined savings plan is always a great feeling.

4) Invest In Building Financial Knowledge: Many online portals can help you understand the basics of getting started. Understanding the practical application of important concepts such as risk profile, budgeting, inflation, asset allocation and dealing with market falls or volatility will be of huge help.

5) Automate your SIPs: Systematic investment plans (SIPs) of mutual funds are a good way to start. If you would like to play safer, you could start with a mix of 20-40 per cent in a recurring deposit with your bank and the balance in a flexi-cap equity-based mutual fund. As you start understanding the investment process better, you could take your allocation to riskier but potentially higher growth options like equity mutual funds, with 70-80 per cent of your investible surplus. But with a higher equity allocation, be prepared to hold on for the long term. Avoid allocating any money into equity (shares or mutual funds) if you can’t stay invested for at least five years.

6) Choose An Online Investing Platform: Don’t just go for lowest cost or highest convenience; also look for good post-investing customer service, ongoing research advice and support.

In the initial stages of investing, focus on things under your control—spending and saving, regular automated investing and holding on to your portfolio when markets fall or fluctuate.

The author is Co-Founder, Scripbox

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