How to go about investing in equity ?

There are a variety of investment options available, with varied level of risk and returns. And there are life goals. So, how to decide where and how much to invest in is a part of financial planning. Let’s look at 7 useful tips which you can use to make your equity investment decisions easy and fruitful.

1.  Let’s start with the thumb rule – amount of available funds to be invested in Equity should be 100 minus your age. That means, if your age is 40, you should invest 60% of your available funds in Equity and of the balance available fund 20% in gold and 80% in debt instruments like PPF / EPF, FDs, Debt mutual funds, bonds etc. (though there are exceptions to this thumb rule)

2. While investing in Equity,  at all times prefer mutual funds over investing in shares directly through stock market.

3. While investing in mutual funds always prefer to invest in funds with 4star & 5star ratings. (unless you have expert advice to invest in some other fund irrespective of rating)

4. SIP is always a safer mode than lump sum investment in mutual funds.

5. If you really want to get the best  from investing in mutual funds through SIP – start early, stay invested for substantial amount of time (withdraw when you have reached your goal and not according to market fluctuations) and be disciplined in investing.

6. Do not try to time the market, invest whenever you can and continue for at least 5 years or until the goal is reached.

7. Always consult with an expert (IFAs/MFDs) while investing in mutual funds.

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