Ready to Start Investing? Make sure you do these 5 things first

First, you need to determine what your short- and long-term goals are. For example, you may want to make a down payment on a house in 3 years or purchase a car in a few months. Additionally, you may have dependents to take care of. Once you know what you need to achieve, you can invest in a manner that will help you meet your targets.

Chalk out a financial roadmap

Making smart investments will help you secure returns that beat inflation. However, investments are more than just a numbers game. They can make or break your finances, and so as a beginner, it’s best that you enter the investment world prepared, with an understanding of how to smartly invest Money. This way, you can be ready for every eventuality.

To have a firm footing, here are the 5 things you should do before making your first investment.

Track your expenses for a few months

It’s important that you know just how much you can set aside from your income to invest. Arbitrarily choosing an amount is not the best way to go about things. A more refined approach is to make your investments based on your monthly budget. If you track your finances for a few months, you will know exactly how much you spend on lifestyle expenses, travel, and recreational activities. Once you have this information, you can trim needless expenses and ascertain the surplus amount that you can devote to investments.

Contribute to your emergency fund

When you’re deciding how to utilize your income, make sure to devote a portion towards an emergency fund. As the name suggests, this fund comes into the picture every time you’re faced with an unforeseen event, such as a medical emergency. It is recommended that your emergency fund be sizeable enough to cover at least 3 to 6 months’ living expenses.

Having an emergency fund in place will allow you to make investments without worrying about liquidity. If you do not have one, you may be forced to break your investments every time you need quick finance and lose out on gains in the process.

Evaluate your personality and risk profile

Understand your investing traits: are you more likely to be risk-averse or take big risks? Do you make investment decisions based on emotions or reason? Understand your thought process and personality and compare it with traits that successful investors have. For example, being patient, focussed and rational are key. Based on your shortcomings you can decide upon the areas you need to focus on.

Then, evaluate your risk profile and determine the quantum of risk you can undertake given your fixed expenses, age, and financial responsibilities. This will help you pick the right avenues to invest in.

Learn about different instruments

Knowing the pros and cons of different instruments will not only help you reap profits but also boost your net gains by way of tax savings. On one side of the scale, you have equities that include stocks and mutual funds. While they may offer you the best return on investment, they are based on the market’s performance and are extremely volatile. Debt-based bonds, debentures, and FMPs have lower levels of risk and also offer good returns. Finally, on the risk-free side of the scale, you have investments like NSCs and FDs.

If your risk profile reveals that you should be cautious, then consider investing in a safe instrument like the Bajaj Finance Fixed Deposit. Here you get security without compromising on substantial returns. This FD offers fixed deposit rates of up to 8.75% on a 3-year FD with interest payout only at maturity and 9.10% for senior citizens. Moreover, the FD is backed by ICRA’s MAAA and CRISIL’s FAAA ratings. These indicate stability as they are the highest ratings in their respective categories. You can plan your finances with precision by computing your returns via the FD calculator and choose between a flexible tenor of 12 and 60 months. It takes just Rs.25,000 to get started and you can even invest online from the comfort of your home.

Use these tips to prepare yourself for the world of investing and limit mistakes that can cost your finances.