To create a healthy wealth-building portfolio, one of the most important points of consideration is how much to invest. Many people think of investing as an afterthought done after all the other spending has been taken care of. However, in such cases, by the time you get around to doing that, there is none left for investing.
Rather than leaving the investment money up to fate, it is best to take the matters in your mind by setting a budget for the investments made in the stock market. Here are some tips that will help you in taking matters into your hands and setting a budget for investment in the stock market.
Make Investments Your Priority
Investing in the stock market should be a priority rather than using what is left at the end of the month. One of the best ways to do that is by visualizing what your contributions will be in the long run. If you are looking to retire, it is best to invest in tax-advantaged retirement funds. By increasing your withholding by just a little bit, there will be a huge difference in the long-term results of the same. Plus, if the budget is predetermined, the money would be absorbed by the investments before you get your salary, thus helping you in better saving for the future.
Creating Budget Items for Investments
Now that you have discovered the importance of equity investment, it is best to start by researching and preparing a list of which stocks you want to invest in. This should be done by first assessing your risk profile for investments. There are different risk buckets you can choose from- high risk, medium risk, medium-high risk, low risk and medium-low risk. In addition, also decide your investment horizon. To get good returns, it is best to keep them invested for a minimum of 7-10 years.
Beware of the Penny Stocks
Penny stocks are the stocks that are available at Rs 10 or less. Though not all penny stocks are bad, but do understand that the price of these stocks is low due to under-demand. Many beginners look towards penny stocks as they appear to be one of the best options available in limited resources. Though the growth potential of these stocks is phenomenal, they are high risk stocks where considerable care should be taken before investing.
Investments of Gains or Surplus Funds
Many investors do not factor certain stocks in their stock market budgets because of their high price. This is the reason when they receive some surplus, they rush towards these same stocks without any thought or analysis. Research has shown that investing in a fundamentally strong company can prove to be counterproductive if done at the wrong time. Always stagger your investments and be a smart investor.
Remember, a smart investor takes no chances and makes a conscious budgeting decision for the stock market after complete research and analysis. If you are looking to create an investment portfolio with good returns, contact our financial advisors for expert advice today.