Most of us work for money. You have to be the child of Bill Gates or Sachin Tendulkar or a comparably rich parent to enjoy life without working for money( and If you are reading this review, it is unlikely that you are one of them!).
We hear a lot of people say? Money is not important for me. I work because I like my job?. Yet, we see the very same people frustrated after the year end appraisals and pay hikes, simply because a colleague got a better hike than they did.
Life will be far better if we acknowledge the importance of money in our lives and give it the respect and attention it deserves. True, Money cannot buy some of the best things in life. But, money can buy more than 80 percent of our day to day needs and it also brings with it a range of options to choose, which cannot be the case for someone without money.
Why should anyone invest at all? Simple? Investment is a tool by which we can make our money work for us instead of we working for money. When you work for money, the money stops coming to you the day you stop showing up at work. Investments, on the otherhand, do not need your presence? your money keeps growing, even in your absence. Money has a time value and investment gives you back more money after a certain period of time.
Now, how much one should invest and where one should invest depends a lot on the what the person needs, the amount of money he/she can spare for investing and his/her ability to take risk. Typically, return and risk go together. But, the biggest risk, in my opinion is not investing at all.
There are investment instruments ranging from the lowest risk( government bonds, Bank deposits etc which will offer returns just sufficient to beat inflation) to highest risk( Venture capital, lending to unorganized sector). It is an individual choice, depending on the aversion for risk. I shall talk about one sector I am passionate these days - Stock market.
Like any investment avenue, stock market provides investors a mix of high risk, medium risk and low risk stocks. You can invest based on your needs and ability to handle risk, but a few things you definitely need to check out before putting you hard earned money on the shares of a company are
1. Financial statements: Has the company been making profits regularly? What is its market share? How have other companies in similar business performed? How does this company compare with them? Has this company been paying dividends regularly? These are questions for which you need to know the answers definitely.
2. Growth prospects: This involves a bit of your own feel of the industry and some guess about future( which may go wrong), but typically if you are looking to make some quick money, you should invest in industries that are growing faster than others.
3. Timing: This is perhaps the most important one and the most difficult one to get right. Invest when the scrip is in a correction mode rather than on a high. Also, you need to be sure of the time frame of your investment . This could be a few days to few years.
Like the Dos, a few Don?t s I can recommend are:
1. Insider information: Do not buy / sell stocks based on insider information or broker recommendation without checking the fundamentals of the company
2. Carried away: Do not rush to buy when the market is in a high and panic and get out when it gets into a correction? you will end up burning fingers( and also your purse).
3. Emotions: Do not get emotionally attached to your stocks. Let go stocks that do not give you the returns you expected.
Most importantly, know your risk profile. If you are a cautious one, restrict your trading to the A Group shares. Invest in B1 or B2 shares only if you are open to take the higher risk that is associated with these companies.
All these are easier said than done. Temperament costs more than ignorance in stock market. So, pick up stocks wisely, have lots of patience and you will make profits . Make your money work for you. The tips may be too basic for anyone already into stock market, but this review is just for those who are taking the first steps.
I know the review is too long, but I sincerely hope it served some purpose.