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Making the First Investment Stroke

Jun 20, 2015 by Priyanka Chakrabarty | 20 Downloaded

Somebody told you about investments and you may have caught a few words like ‘high returns’, ‘small amounts’, ‘compounding’ and these words stayed because these are words we all like to hear. We all like the concept of ‘less is more’ and we are trying to get the most out of the least we gave. You are probably brimming with optimism because you wish to change your financial future by embarking on investments sooner rather than later. However, the moment you step into this world and start exploring you will be confused and flabbergasted by all the products, services and options that are available. You will be even more scatterbrained when you ask for people’s opinion and everyone says varying options like ‘mutual funds’, ‘stocks’, ‘fixed deposits’ and ‘PPF’ and so on and they all make sound their preferred option the best investment tool. Suddenly this does not sound very lucrative rather it has started to sound complicated accompanied by jargons you do not understand. This is when you decide thinking of investing was bad idea. You take back the money, stash it in your piggy bank and forget about it after consoling yourself that at least you were able to save.

This is a very common phenomenon with a lot of potential investors who want to make their first investment. While the funds maybe available the savings in piggy banks do not get transferred to investments simply because they lack the knowledge to channelize the funds. Hence, if you are one such potential investor and you have no clue about selecting investing options then please read on.

Learn to Filter Advice

Advice is often given out freely and even it is uncalled for. People will have various ideas about investments even though they may not have invested in any one of them. Take advice from people who have experience in investing and have been able to make substantial gains. The best people to take financial advice from are financial advisors and planners. They are qualified and experienced in their field of work and usually provide financial solutions based on your age, investment horizon, investment capacity, risk taking appetite and so on. When you are investing under watch of financial experts chances are you will make a gain rather than losses. They might take a minimal fee but as you already know there is no such thing as a free lunch.

Gather Product Knowledge

It is your investment to make so your interest and participation is what matters the most. You financial advisor or neighbor may have made some suggestions but it is up to you to make the final call. The product literature for every investment and mutual fund is available on the internet. The Asset Management Company’s website will have a dedicated section for the funds. There are various online portals which publish fund reviews by assessing the fund on various parameters. Gathering knowledge on the fund and the historical returns generated will give a clearer picture of the possible funds that suit your needs and then you can proceed to finalize a fund.

Have a Goal

When you heard the magic words like ‘compounding’ and ‘returns’ what was the first goal that came to your mind? Ideally you should have a goal which you want to fulfill through this investment. A goal becomes an emotional motivating factor for you to continue investing. If you really want to fulfill the goal then you will take the first step towards investment and maintain discipline till you have achieved the desired returns. The goal could be a short term goal like a holiday or a long term goal like purchasing a house or even becoming a Crorepati at Age 30 and so on.

Identify Your Investment Taste

As an investor you might be naturally inclined to take risks and the volatility of equity markets does not scare you. Hence, you can start your investments with a diversified equity fund. The key aspect of investing in equity is that you have to leave the investments for a substantial time period to get decent returns and reduce the volatility. However, before you start investing, let us explore some more options for you.

You may not be inclined to take risks at all. Hence, debt fund might be an option for you as it invests largely in debt instruments such as bond and securities owned by Government and private bodies. They provide moderate returns while exposing your investments to debts and Government Securities. You may also opt for investing in Public Provident Fund or National Pension Scheme (NPS).

In case you want to take moderate risk then Balanced Funds is an excellent option which caters to the need of both the high risk takers and moderate risk takers. 50 – 75% of the investment is channelized to equities and rest in debt funds. The balanced funds minimize the risk that rides along with equity investments.

There are also other kinds of funds such as index funds the returns of which replicate the movements of the market. It may be a little risky for your first investment in a fund. However at the end of the day it is your investment decision and you can always take help of a financial planner before you make the plunge.

How old are you?

An expert once told me that to understand how much an individual should invest in equities the thumb rule to be applied is “100 minus age of investor”. The answer to this question will tell you the extent to which you should ideally incline towards equity funds. If you are 20 years old then you should be investing 80% in equity finds and you have the advantage of a long investment horizon. The older you get the inclination towards debt funds should also be present in your investments. As for your first investment in a fund, incline towards equities if you are starting young. Equity Linked Savings Scheme funds (ELSS) might be a good option as it provides tax benefits and you can reap quick benefits in three to five years.


You are about to make you first investment. Make sure it is not your last. The only way to reap maximum benefit out of your investments is to be patient and let time and compounding do its magic. Take advice from a financial advisor and avoid the inexperienced advice that is often thrown on us. Let the Asset Management Company manage your mutual funds through qualified fund managers. If you are young, be willing to take risk which has always paid off in the long term. The compounding effect will outweigh all the volatility that the markets may have. Do not let a little volatility make you distrustful of your investments and the funds. Over a long time horizon it is probably not going to make a major difference. Now that you have entered this world stay on and watch the magic unfold. Happy Investing!

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Priyanka Chakrabarty

A literature enthusiast who loves to write. An ardent social worker who dreams of bringing about change and hopes to do so through her writing. A firm believer of the saying pen is mightier than the sword, Priyanka is an English Honours graduate. She also pursed Diploma in Wealth Management Practice from IIFP and is a certified social media expert.

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