Investing is like planting a tree. All you need to do is plant a small seed and give it proper care and maintenance over many years to see growth and results. But where do you start if you’re a beginner? 

In this blog, we will walk you through smart investment strategies and plans that are perfect for beginners. No complicated terms or overwhelming advice—just straightforward tips to help you grow your money and achieve your financial dreams.

Why Should You Start Investing Early?

Warren Buffet, the world-renowned investor, purchased his first stock at the age of 11. Real wealth requires time to grow. Starting your investment journey early is one of the smartest financial moves you can make, and here's why.

  • The power of compounding: Even small, regular investments can turn into a significant amount over time due to the magic of compounding. When you earn returns on your investments, those returns start earning their returns. This phenomenon allows your investments to grow exponentially over a long period.
  • Impact of market fluctuations: The stock market can be unpredictable, with its ups and downs. However, history shows that over the long term, markets tend to grow. By starting early, you have a longer time horizon to ride out those short-term dips.
  • Risk-taking ability: When you’re younger, you have a greater ability to take on risk. Riskier investments, like stocks, often offer higher returns than safer options, such as bonds or savings accounts.

5 Investment Plans That Are Perfect for Beginners

As a beginner investor, you may feel overwhelmed by the innumerable investment options and the unfamiliar financial jargon. However, you don't need to invest in investments that you don't understand. Here are some beginner-friendly plans that offer great returns with a manageable level of risk.

1. Mutual Funds

Mutual funds are investment schemes that collect money from multiple investors and invest this pool in a mix of stocks, bonds, or other securities. Mutual funds are perfect for beginner investors because they can provide good returns with a relatively lower risk. You don't need to study stocks and investable securities yourself, because mutual funds are managed by experienced and professional fund managers. You can invest a fixed amount every month through SIPs (systematic investment plans) or you can invest a lump-sum amount.

2. Explore Passive Income Earning Opportunities

As you progress, explore ways to create passive income streams. This is where becoming an insurance agent can play a key role.

Income Through Commissions: As an insurance agent, you’ll earn commissions on policies sold. These commissions can become a reliable stream of income if you build a strong client base.

Residual Income: Insurance agents often earn residual income, which means you’ll continue to earn money on policies you sold years ago, as long as they remain active.

Flexible Hours and Scalability: As an insurance agent, you can work part-time or full-time and scale your efforts based on the time you can dedicate. This flexibility makes it an ideal way to supplement your investments.

3. Unit Linked Insurance Plans (ULIP)

Unit Linked Insurance Plans (ULIPs) combine investment and insurance benefits into one plan. It offers you the dual advantage of life insurance coverage along with the potential to grow your wealth through investments in equity, debt, or a combination of both, depending on your plan. When you pay a premium for a ULIP, a portion of it goes towards providing life insurance coverage, while the remaining amount is invested in funds of your choice. You can choose from equity funds (higher risk, higher returns), debt funds (lower risk, stable returns), or balanced funds (a mix of equity and debt).

However, ULIPs have a mandatory 5-year lock-in period which means you can’t withdraw funds during this time.

4. National Pension Scheme (NPS)

The National Pension Scheme (NPS) is a government-backed retirement savings scheme which is open for everyone, whether they are salaried or self-employed.

To start investing in NPS, you need to open an NPS account and contribute to it periodically. Your contributions are invested in the asset classes of your choice, and the returns depend on the market performance of those investments. Upon reaching the age of 60, you will begin to receive an annuity pension from the corpus you have invested over the years.

Contributions to NPS are eligible for tax deductions under Section 80C (up to ₹1.5 lakh per year) and an additional deduction of up to ₹50,000 under Section 80CCD(1B).

5. Public Provident Fund (PPF)

If you’re looking for a safe, long-term investment option, the Public Provident Fund (PPF) is a tried-and-tested option in India. PPF is a government-backed scheme that offers guaranteed returns along with tax-free interest and tax benefits under Section 80C. With a tenure of 15 years, it encourages long-term savings while providing the flexibility of partial withdrawals after a certain period. This is a great starting point for beginner investors, considering its safety.

Simple Investment Strategies to Kickstart Your Journey

1. Follow the 50:30:20 Rule

The 50:30:20 rule is a simple budgeting strategy that can help you manage your finances.

  • 50% of your income goes towards needs like rent, groceries, and utilities.
  • 30% is allocated to wants, such as dining out, entertainment, or hobbies.
  • 20% should be saved or invested to build your wealth.

By sticking to this rule, you ensure that a portion of your income is always set aside for future financial goals.

2. Buy and Hold Strategy

This is the best investment strategy for those who don't understand much about the movements of the securities market. Under this strategy, you invest your money in high-quality stocks or mutual funds and hold them for a long time, regardless of market fluctuations. This strategy takes advantage of the power of compounding and allows your investments to grow over the years. It's perfect for beginners who want a low-maintenance approach to investing.

3. Start a Systematic Investment Plan (SIP)

A Systematic Investment Plan (SIP) is one of the best investment methods for newbies. It is a way of investing small, fixed amounts in mutual funds at regular intervals (monthly, quarterly, etc.). The amount is automatically deducted from your bank account as per the schedule. SIPs help you develop a disciplined savings habit and reduce the impact of market volatility by investing consistently through the ups and downs of the market. You can start a SIP with just ₹500 and gradually increase the amount as your income grows.

4. Diversification

Diversification is a strategy that involves spreading your investments across different investment options. For example, if you have saved up ₹4 lakh, you can invest ₹1 lakh into each beginner-friendly investment option listed above. By not putting all your money in one investment, you can protect your money from significant losses if one investment performs poorly.

Bottom Line

By following these simple investment strategies, you can kickstart your journey toward financial growth and stability. Study the beginner-friendly investment plans that we recommended, to start your journey right. Eventually, you will learn how to make an investment strategy for your individual needs and goals. Remember, the key to successful investing is consistency and patience. So start small, stay committed, and watch your wealth grow over time!

 

FAQs on investment for beginners

What investment is best for beginners?

Mutual funds are considered the best investment option for beginners, due to their relatively lower risk and great returns.

How should a beginner start investing?

Beginners can start investing by following the 50:30:20 rule and investing 20% of their monthly income into investments like mutual funds and stocks.

What is the simplest investment strategy?

Buy and hold is the simplest investment strategy. Under this strategy, investors select promising shares and mutual funds and invest money into them for a long time without selling them.