I have money but don’t know where to invest. How do I take a decision?

06 NOVEMBER, 2019

"I have Rs. 10,000/- with me. I want to invest it in stocks but I have no idea about the equity market. What should I do?"

The amount is just a hypothetical figure but the question is one that gets asked to our bankers multiple times by people across age groups and careers. It could be a college student who just got some gift money from a relative or a young graduate on their first job or an experienced professional who is visiting the bank for some work. It could also be a senior citizen who has been following the news on stock markets.

There is only one right answer to this question: Talk to an experienced finance professional. DO NOT try to invest in the stock market on your own. People say that stocks beat inflation hands down but that is a lie. Good stocks beat inflation hands down. Bad stocks make you lose your money.

Whenever people ask us this question, the probability that they are not thinking from a long term perspective is high. What they might mean is, ‘Can you give me a hot tip?’ maybe a stock that will go up in the short term. The problem is that it is difficult to predict the short term. The tip might be wrong and the stock may go down.

What then should you do with your money if you want to beat inflation? An easy way to answer this is outsourcing. Let’s assume you are an MBA or working in a reputed company. You are an expert in your field and people look up to you. Now you are struck by jaundice and have taken ill. What will you do? It’s simple: You’ll visit a good doctor. You will not try to treat yourself. Why? Because you don’t have the required expertise in this field.

You have to follow the same philosophy when it comes to your finances. You have to visit a good financial planner who will evaluate your risk portfolio, your long-term and short-term financial goals and come up with a list of financial products that you are comfortable with.

You might be great at making money. However, making your money earn more money is a different ball-game altogether.  The best route to invest is via mutual funds. Mutual funds don’t mean only investing in stocks. You can invest in equity mutual funds, debt mutual funds or an equity-debt mutual fund. Mutual fund managers are professionals with several years of experience whose job is to invest in different financial products, lower the risk for their investors and give the best possible returns.

The best method to invest in mutual funds is through SIPs (systematic investment plans). A SIP makes you invest a fixed amount into the mutual fund of your choice every month. It inculcates financial discipline in investors and ensures that you average out your purchase prices. 

In short, when you are confused about a financial product to invest in, please talk to your financial planner and choose a good mutual fund based on your risk temperament and financial goals.

Click here to start your investment journey today.