The smart investor guide: How to easily reach your investment goals

Investing is the best way to ensure your money doesn't reduce in value. It is a better alternative than savings as it allows you to beat inflation and build a wealth corpus, something a savings account cannot offer. However, on the flip side, investing money can be risky if you do not know how the underlying asset works or its risk. Hence, sticking to an investment plan is essential as it minimises your loss and helps create wealth.

In this article, we have shared a few smart investment tips that can help you invest systematically. Following these tips can be helpful even in testing market conditions.

Define your investment objective
 

The starting point for any investor is to define the investment objective. Once you know what you need from your investments, you can easily select the asset that could help deliver the returns you need. Having a clear objective also provides peace of mind in all market conditions.

Start early
 

Your financial muscle will be stronger if you start investing early. When you’re young, you can take more risks with your investments. Over time, risky investments can yield handsome returns and boost your portfolio. Also, assets like mutual funds leverage the power of compounding, which helps grow your investment exponentially. It builds a large corpus with time, helping beat inflation and maximise returns.

Assess the risk/reward ratio
 

After establishing your investment objective, you must assess various investment options. You can choose a safe or risky investment option depending on your investment goals and risk appetite. An instrument like a fixed deposit (FD) carries less risk than equities, although the scope for handsome returns is more in the latter. The best way to find a suitable investment plan is by assessing the risk/reward ratio and evaluating whether it meets your risk appetite. You can calculate the expected returns of different investment options by going through previous performances or taking professional assistance.

Conduct thorough research
 

Research is the key to smart investments. You may incur huge losses by investing in assets that do not match your risk appetite. Understanding which investment option is best suited is crucial, and you can learn it using online resources and books.

Diversify your investment portfolio
 

Portfolio diversification is one of the smartest investment strategies to help manage your risk and maximise your returns. Once you have researched various investment instruments, you can invest fractions of your capital in safe and risky investment options to balance your risk exposure. If one of your investments fails to generate income, you can balance it through other investments.

Invest consistently
 

There are no shortcuts to creating wealth. You need to invest consistently and regularly. To succeed as a smart investor, you must get your money to work every month or quarter, depending on your financial requirements. The longer your money stays in an asset, the better returns you will likely earn.

Track your investment regularly
 

Profit booking and changes in investment strategy are necessary from time to time, so it is always advisable to keep track of your investments. Based on their performance, you may need to change your investment strategies.

Inflation reduces the value of your money but investing can tackle the problem and eventually grow your wealth. However, it involves certain risks, so you must follow an investment plan to earn returns and generate an adequate corpus.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.