Although there is no designated ‘best age’ to start investing, we know that the early bird gets the worm; one should start investing as soon as they can, assuming they’re financially ready. Starting early allows investors to take more risks and have an opportunity to earn better returns since they can recover from any wrong decisions without affecting their long-term financial goals. By getting your skin in the game early on, you are giving your money enough time to snowball and generate wealth over the years.
Here’s how you can invest your first ₹10,000 by minimizing investment risk in your stock portfolio:
Blue Chip Stocks: These are typically large, well-established, financially stable companies with excellent reputation. Blue-chip stocks typically have a market capitalization in billions, are generally market leaders and more often than not, are a household name. They are considered as safe and dependable investment options as they present a slow but moderate growth potential with low volatility and can endure economic downturns.
Examples: Coca-Cola | IBM | Apple | Pfizer
Growth Stocks: These are companies expected to grow sales and earnings at a faster rate than the market average. These stocks generally do not pay dividends. This is because the investors of growth stocks are typically individuals or firms that want to reinvest any earnings they accrue in order to accelerate growth in the short term. When investors invest in growth stocks, they anticipate that they will earn money through capital gains when they eventually sell their shares in the future.
Examples: Amazon | Facebook | Netflix
Dividend Stocks: These are companies that pay out regular dividends. Dividend stocks are usually well-established companies with a track record of distributing earnings back to shareholders. They are known for being safe and reliable investments.
Examples: ONGC | Indian Oil | Coal India
Index Funds: An index mutual fund is said to provide broad market exposure, low operating expenses, and low portfolio turnover. These assets follow their benchmark index regardless of the state of the markets. They are generally considered ideal for retirement accounts since their diversity provides lower risk than owning a few individual stocks.
Examples: HDFC | UTI | Tata
Consumer Staple Stocks: These companies refer to essential goods used by consumer such as food and beverages, household products as well as alcohol and tobacco. These are products that consumers are unwilling to cut out of their budget regardless of their financial situation. These stocks are considered to be non-cyclical, meaning that they are always in demand all year round, regardless of how well the economy is performing. Consumer staples are a haven for stakeholders in times of market recession.
Examples: Hindustan Unilever | ITC | Godrej
Hedge Funds/Cryptocurrency: These funds are actively managed alternative investments that usually employ non-traditional investment strategies to earn active returns for their shareholders. They are more expensive as compared to conventional investment funds and will often restrict investment to high net-worth. They share multiple risks potentially exposed to huge losses if not planned out properly.
Examples: Gold | Bitcoin | Ethereum
In conclusion, it is always wise to thoroughly study the live market before investing. Diversify your portfolio to minimize risk instead of owning a lot of random individual stocks. Do not indulge in panic selling if your stocks hit lows, remember that investing is not a sprint but a marathon; allow your money to grow over the years. Start today!
"If you don't find a way to make money while you sleep you will work until you die" - Warren Buffett
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