Step by Step Guide to Start Investments in India in 2024

This post was most recently updated on February 25th, 2024

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Investment is often a topic that is largely misunderstood in India. The moment you talk about investment, people assume it’s for short-term gain, Stocks, real estate, etc. In this article, we will try and talk about what investment really is and how you can get started with investments. We will look at Step by step guide to start investments in India.

Step by Step Guide to Start Investments in India
Step by Step Guide to Start Investments in India

What is an Investment?

So what is an investment?: Investment is something where you are keeping aside a valuable thing(it can be time, money, etc) with the intention of benefiting from it in the short-term, medium-term, or long term.

People often relate investment only to money investment but in actual fact, time investment is the best form of investment. When you invest your time effectively then you can get much more returns out of it than investing money!

Having said that investing money is an essential thing that everyone should understand clearly and should plan to get right!

So are you ready for investments? let’s start with your assessment as below:

  1. Do you already have an emergency fund?
  2. Why do you want to invest? (Time or Money?)
  3. How much money are you planning to invest?
  4. How long is your holding period and how much risk can you take?
  5. How much time can you commit to your investment?
  6. Is there an investment that can help you fulfill your mission?
  7. Should you diversify your portfolio?

In this article, we will focus on investing Money!

It’s really important to understand why you want to invest before you jump in and put your hard-earned money to work. Everyone wants to get rich quickly and why not they are perfectly fine to have that thought. But with this getting rich quickly mindest many people have lost money rather than making any!

On the other hand, there are many people who are too conservative and do not invest their money in the right instruments and they end up getting returns which doesn’t even beat inflation.

In this Step by Step guide to start investments in India, we will see how you can plan your investment journey so that you don’t end up losing money and have a sound understanding of making your fundamentals strong to start your investment journey.

Step by Step Guide to Start Investments in India

Estimate Cost : INR

Time Needed : 00 days 00 hours 20 minutes

Steps detailing what you need to do to start investing in India

  1. Step 1: Do you already have an emergency fund?

    What is an Emergency Fund

    Before you start investing your money, you have to first assess your current financial situation. Track and anticipate your expenses and save up for an emergency fund. Three to six months’ worth of your monthly expenses is recommended. Once you have an emergency fund, you become more confident in taking investment risks. 

    Do not confuse between your investment and Emergency fund as they are meant for different purposes!

  2. Step 2: Why do you want to invest?

    why to invest

    The main reason you want to invest is to make your money grow. Unfortunately, this reason is not enough. You should have more specific objectives. Are you saving up for retirement? Do you simply want extra income? or do you just want to become rich quickly?

    Let’s be honest – Everyone wants to be rich quickly and why not, we all want to be millionaires. but the thought of becoming rich quickly has made many people poor rather than rich!

    Knowing how you are planning to use the profits from your investments helps in determining the best investment product for you.

    For example, if you want to prepare for the education of your children, instead of investing in a risky stock you may want to have your investment secured in terms of PPF or debt mutual funds. 

    If you’re simply preparing for a special occasion such as your wedding next year or a vacation out of the country, then it’s wiser to put your money in short-term, low-risk investments such as debt mutual funds.

    If you have several objectives, list them down and assign their importance to you. 

  3. Step 3: How much money are you planning to invest?

    how much you want to invest

    This is a difficult part; Everyone thinks they do not earn that much to invest. They postpone their investment plan because they think that they earn very little to start any investment.

    Believe me, even if you earn 5 times what you are earning today- you will still feel that you earning less. So rather than postpone your investment plans, you should always look to take out a fixed portion of your earnings towards investments.

    If you are a beginner to investment, start with a small amount and keep increasing that amount every month. After a year when you see your investments have grown, you will feel confident about putting aside a sizable part of your income towards investments.

    Do not over-leverage yourself when it comes to investing i.e. do not invest in borrowed money!

  4. Step 4: How long is your holding period and how much risk can you take?

    how long is your holding period

    Investments take time before they return income. Different assets increase and decrease in value at different rates. This is the reason you must understand that your investment choice plays a crucial part according to your needs.

    You must not put all your eggs in one basket and stick to only one investment approach.

    You should split your investment goals into multiple ways as below:-

    1. Long-term goals – Invest in instruments that will give you good returns in long term(keep in mind that these instruments may give you negative returns in short term) – For example investment into stocks.

    2. Medium-term goals – Invest in instruments that give good returns in the medium term with less risk.

    3. short term goals – invest in instruments that give you fixed returns.

    consider reading – safe investments with high returns in India

  5. Step 5: How much time can you commit to your investment?

    how long you want to invest

    This is a common misconception among beginners, they think that after investing their money, they could just sit back, relax, and wait for the money to grow. Investments, in general, do not immediately translate into passive income. Your active participation is required for it to become stable and profitable. 

    Therefore, you should determine how much of your time you can devote to studying and monitoring your investments. Remember that businesses experience lean and peak seasons and the money market fluctuates if you are out of the loop when these things happen, chances are you won’t see your money back.

    Keep this in mind when you finally choose your investment, especially in stocks!

  6. Step 6: Is everything clear now about why you’re investing?

    investment understood

    After fulfilling the requirements that were asked in the previous steps, it’s now time to develop your personal investing mission statement. Write it down and read it before you make investment decisions. This helps you focus on your objectives and avoid being sidetracked into less optimum investments.

    Below are sample statements that could guide you: 

    1. I have Rs 20,000 just sitting in my savings account which I want to invest for some extra income.
    2. I’m planning to use this money next year to pay for my vacation trip abroad so I’m only willing to invest in short-term, low-risk investments.
    3. I’m busy at work so I can commit only a few minutes a day to track my investments. 
    4. I want to finally quit my job so I need an investment that will help me accomplish that.
    5. I currently have Rs 50,000 which I’m willing to invest in long-term and medium-risk investments.
    6. I’m hoping to leave the corporate world within two years, so I need my investment to give returns that can cover my expenses by that time.
    7. I’m willing to commit at least two hours every day to studying and monitoring my investments. 

    It’s best that you write a draft of your mission statement and revise it for the next few days as you reevaluate and rethink your objectives and investment criteria.

    Consider reading – Investing for Beginners guide in India

  7. Step 7: Is there an investment that can help you fulfill your mission?

    investment choice

    We now come to the most important part of your journey to investing. Finally choosing the right investment instrument for you. By now, you probably have some candidates in mind but to give you more options, here’s a list of investment options you can consider to start with the Top 10 Best investment options in India

  • Investment advisor
  • Money to invest

Some Common Questions from First-time Investors

Here are some common questions that first-time investors have in their minds:

How do I Start Investing with Little Money?

You can start investing with as little money as possible. There is nothing called little money in Investment. A mere Rs 500 per month is a sufficient amount to get started with investments.

You can start saving this little money and over time the little money will turn itself into a noticeable amount with the power of compounding. If you have less money then you can probably start doing small SIPs into equity mutual funds and hold onto your Investments for some time to get good returns.

How much Money should a Beginner Invest for the First Time?

If you are a beginner then you should be careful about how much money you should put in when you are investing for the first time. You should only put that much money losing which will not affect your financial conditions.

We have seen many people get carried away when it comes to investing for the first time and they invest huge sums of money without even understanding the repercussion of losing the money.

You should take a wait-and-watch method. You should first understand whether the investment method is working for you or not. Be patient and understand the investment mechanism before you invest a sizeable amount of money.

Consider reading: Important stock market terminologies

What are Some Best Ways to Save Money with a Small Salary?

You probably feel like your income is never enough to pay for all of your expenses if you’re like most individuals. It’s possible that you’re having trouble making ends meet and are unsure of your ability to ever save money.

Consider using our Investment Goal Calculator

The good news is that there are ways to save money even if you just get a tiny salary. It might need a little extra work and original thought, but it is unquestionably feasible.

Here are some ideas about how to save money on a low salary:

  1. Create a budget. Understanding where your money is going in detail is the first step in saving money. Examine your spending to identify areas where you might make savings. Perhaps you are overspending on clothes you don’t actually need or eating out frequently. You can track exactly where your money is going and make any adjustments by making a budget.
  2. Spend less money that is not necessary. Once you’ve established a budget, it’s time to start reducing wasteful spending. This can entail quitting your daily Starbucks habit or terminating your unused gym membership. You’ll have more money to put toward savings if you eliminate these pointless costs.
  3. Look around to find good offers. It’s crucial to compare shops and hunt for the greatest prices while purchasing groceries, bills, and other necessities. Compare costs at various retailers, think about using coupons, and go to bargain places. You can eventually save a sizable sum of money by doing this.
  4. Find ways to generate additional income. If you’re finding it difficult to save money on your meager wage, you might need to search for side jobs. This can entail taking on a part-time job, beginning a side business, or selling things you no longer use. You’ll have more money to put toward savings if you make more money.
  5. Save Automatically. Setting up automatic savings is one of the easiest strategies to save money on a low wage. Create a savings account and arrange for a set sum of money to be deposited there automatically each month. In this manner, you can avoid the temptation to spend money and save without even realizing it.

Consider reading: What is financial planning

FAQs on Step by Step Guide to Start Investments in India

  1. What are the different types of investments?

    There are many different types of investments, including stocks, bonds, mutual funds, ETFs, real estate, and commodities. Each type of investment has its own risks and rewards and is suitable for different investment goals and objectives.

  2. What are the risks and rewards of investments?

    The risks and rewards of investments vary depending on the type of investment, the amount of money invested, and the investment goals and objectives. In general, investments carry some level of risk, but also have the potential for high returns.

  3. What is the minimum amount of money required to start investing?

    The minimum amount of money required to start investing varies depending on the type of investment and the investment goals and objectives. Some investments, such as mutual funds and ETFs, can be started with as little as 500 rupees, while others, such as real estate, may require a larger amount of money to start.

  4. What is the best way to start investing?

    The best way to start investing depends on your investment goals and objectives, your risk tolerance, and your financial situation. Some people may benefit from working with a financial advisor or investment professional, while others may be comfortable making their own investment decisions.

  5. What are some common mistakes to avoid when investing?

    Some common mistakes to avoid when investing include investing without a plan or strategy, taking on too much risk, buying high and selling low, and not diversifying your portfolio. It is important to avoid these mistakes and to carefully plan and manage your investments to maximize your chances of success.

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