We’ve talked about the kind of financial risks you must be aware of so you can avoid them when you start investing. Finally, we’ve reached the stage where you must know the steps to begin investing.
Like Rome was not made in a day, successful investors aren’t made in one day either. Understanding how the market ticks, what works, and what doesn’t. Finding your investor personality will take time and patience.
Let’s see what you can do to get started.
Set up Goals
The first step to investing as a teen is setting up goals, i.e., financial goals. These goals can be either short-term or long-term goals. Knowing your financial goals will help you pick the right assets and the amount you must invest to achieve your goals.
Saving a little now for the future will teach you about delayed gratification, something successful investors understand.
Research the Assets, Their Return Potential, and Risks
Once you have picked the goals, the time, and the value needed, it is time to opt for the best investing option. Understand each asset -fixed deposit, recurring deposit, PPF, mutual funds, and stocks work. Find the return potential of each investment and the risks associated with them.
For instance, if the goal is small and the period is short, you can start with a recurring or fixed deposit. But if the goal term is longer, you can invest in equity mutual funds or explore investing in stocks directly.
Research the Companies You Know
The ‘buy what you know is a maxim most investors know. The idea is to invest in companies that you understand. So you can start with listing companies you use the products of or know.
Once you have the list handy, you can search online to get more information about the company, its growth prospects, the fundamentals of the company, and how well it has been doing over the years. Finally, understand the movement in stock prices, and compare its price today with its prices a few years ago.
Find out more about dividends and how you can reinvest the dividend to continue saving and building your assets. If you know the company and understand what drives it, you could become a long-term investor.
Set up Your Savings and Demat Accounts
Investing is possible only when you have a savings and Demat account. If you are 17 or 18 years old, get your parents to help you open these accounts.
Deposit your allowance in your savings account and use it to invest in stocks. Monitor your investments to know if they are on track to help you achieve your goals. Set up an e-mandate if you invest in an asset using money from your account. If you are a minor, your account will be a minor account, and your parents will be the guardians.
Invest In Index Funds
You may love instant gratification, and investing for the long term may not be interesting enough. So, to make sure you have more control over your investments, consider Index funds.
If you invest in a single company, you may experience every high and low the company faces. However, if you invest in index funds, you will probably get exposed to your favorite companies with the same amount you invest in a single company. Doing so will help you have a better attitude towards investing, understand how diversification works, and make money. For instance, if you have Rs. 100, you can buy a single share of Company A with the share price of Rs. 100. But if you invest in an index fund, your hundred rupees get proportionately invested in ten other companies that form the index fund.
Understand How To Avoid Speculation
As teens, the lure of easy money in stocks and crypto-currency may be hard to resist. But avoid speculation initially. Know why it could be a bad idea to speculate when you have just begun investing and do not understand the stock market.
Invest a small sum in a virtual stock market app and monitor your investments. If the speculation doesn’t work, you will realize the consequences without suffering from monetary loss. But if you feel you must experience it for real, then invest a small sum you can afford to lose and write it off for the long term. That way, you will understand the pain of losses and the happiness of earning good returns.
Be Eager To Learn
The market is challenging to forecast, but volatility will always be a part of it. Learning to become a successful investor is an ongoing process where the investment journey is often long. There will be times when the market may behave differently despite all the precautions your take. It is better to acknowledge your mistakes and learn from them.
There is plenty of information available on the Internet. Make reading books on investing a part of your routine.
We’ve shared a list of steps you can follow when you start investing. Tell us what you feel about this article and email email@example.com.