12 important steps to investing

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Investing is an art. We have seen ‘Why Investing is important?’ Now let’s see what care should be taken while investing?

Authorized intermediary:

There are many investment avenues and different investment products. There are hundreds of Financial Services firms in India. It is important to approach SEBI registered Financial Advisers only. They will recommend products which are managed by authorized intermediaries only. Don’t fall for online Advertisements.

Research is very important:

It is important to do enough research about Authorized Intermediary through which you are doing the investment. Read about reviews on them, visit their websites, if possible talk to their existing clients etc. Same is applicable for the Investment products. You are investing your hard-earned money. Do proper research before investing in any product.

Explore the options available:

It is important to explore all the options available to you. It will help you make an informed decision. In Financial Services, client servicing is frequently needed. See if your Service Provider gives you customized services and proper attention or not. If anything goes wrong, it is difficult to switch in some products/services. A comparative study is important before investing.

Obtain Written Documents:

Don’t do any financial transactions based only on verbal communications. It is important to have written communication wiz. application letters, emails, acknowledgement of forms, fees receipts etc when you do any transaction. Go through all the documents related to the investment. Obtain copies of the all those written documents of your investment. Brochure of the products, Rules and Regulations, company profile etc. should be obtained before investing.

Read and Understand such documents:

We have developed a habit of scrolling down terms and conditions of installed software. We just tick on ‘I agree’ and submit it without reading single word from it. This shouldn’t be done while investing. It is very important to read and understand such documents to avoid future disputes.

Verify the legitimacy of the investment:

We have seen many cases of chit-funds and money-rolling businesses where the company management eloped by duping investors money. If such things happen, we hardly get any justice in time which leads to regret and frustration. The only way to avoid such fraudsters is to invest only in the products run by well-known companies or Government etc. It is important to verify the legitimacy of the investment before investing.

Find out the costs and benefits associated with the Investment:

Financial Products sellers have a Sales target to achieve. Sometimes they really don’t bother about the needs of the customer and sell them products on which they get good commission. It is the responsibility of Investors to find out costs and benefits associated with the investment first. Investors should find of whether there is any hidden cost which seller isn’t revealing to you. Fortunately, we have various websites where you can easily get details about these products. No harm in cross-verifying the facts before investing.

Assess the Risk-Return profile of the investment:

More the risk more is the return. is the basic principle of Investment. It is important to first know your own risk profile. Then accordingly you can see which products suit you more. Assess the risk-return profile of the financial products before investing. If someone promises you Double returns in short-time, run away from that person. Even a 10% CAGR returns are considered to be a good return which beats the inflation. More than 16% return on the portfolio is an excellent return on equities.

Know the liquidity and safety aspects of the investment:

In case of emergency, you should be able to sell your assets and raise funds from the same. Assets should be liquid enough. The safety aspect of Investment is one of the most important aspects of investing. We have seen people who have lost their down-payment in properties which didn’t have all the clearances certificates. Invest in safe investment avenues where the only risk involved in about ‘investing related risk’.

Ascertain if it is appropriate for your specific goals?:

The success of financial planning depends on how you choose an accurate product for achieving some specific financial goal. Goals can be divided based on time duration. Less risky products are good for long-term goals while you can take some amount of risk for your short term goals.

Compare with other Investment Opportunities available:

Suppose, you are willing to buy a financial product for Investment. You can have your Pension Fund with a company with which you are working, you could take Atal Pension Yojna or National Pension Scheme by Government or you can choose some Hybrid Mutual fund which can give 10-12% annual returns. The choice is completely yours. Based on your risk appetite, income, and requirements you should choose the right option.

Right Fit in the Portfolio:

Never keep all eggs in one basket. Proper diversified portfolios allow you to sleep peacefully in nights without worrying much about your investments. Your every Investment should be complementary to each other. Avoid Repetition and over-diversification. Examine if the product you are investing in fits in with other investments you have already done or considering to make.

These are the most important steps to Investing. Next time when you will buy any financial product or invest in any investment avenues, please consider these points. Will you follow these points properly? Do let me know in the comments.

Basics of Investing by Stocksbaazigar Part – 1 (Youtube Live video)

(Disclaimer: Stocksbaazigar Mr. Deepak Doddamani is not a SEBI registered Financial Adviser. He is NSE’s Certified Investment Analysis Professional and NSE’s Certified Marketing Professional Level – 4).


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