- Know the real reason why you want to invest (or save or buy insurance).
- List down the actual goals for which you are investing. You need a powerful ‘WHY’ to continue investing for years.
- Understand the asset allocation that you are comfortable with. Also, understand the asset allocation that is required for each of your goals. Both can be different.
- Put money in your PF (PPF or EPF or both) judiciously. Don’t ignore it. Don’t go overboard with it. It can form the bedrock of your portfolio and also bring in the much-needed stability in your wealth creation journey.
- Start you SIPs in equity mutual funds (and if necessary, debt MFs).
- Do not stop your SIPs. Especially when markets are down. (why?)
- Invest additional money (if you have) when markets as well as PE or P/BV are down.
- Don’t invest additional money or buy less when the PE or P/BV is high (like for Nifty, 22 to 24+ PE can be high – details).
- When people start discussing that SIP in last few years has given lower returns than bank FDs, consider investing additional amounts.
- When stock market returns in last few years have not been good, consider investing additional amounts.
- The additional amount in above four points (#7 to #10) is over and above the SIP amount (in #5).
- Direct stock investing is tough and not suitable for everyone. Understand this.
- Once you have put in place the above mentioned SIP + Additional Investment model, only then consider direct investing in stocks. (ESOPs are a different matter).
- Focus on increasing your income (if possible, side income too). You can only save or invest a part of what you earn. So increasing your income is necessary. But don’t go overboard or kill yourself doing that.
- Don’t spend too much on unnecessary stuff. Prefer spending money on experiences. You will be happier, have better memories and surplus money to put to work.
- If you earn well and save money well in initial years, you can force the money to work hard for you instead of you working hard for it.
- Buying a residential house is a must. So save some money for buying it. But buying real estate as an investment is overrated (most of the times).
- Having loans is no excuse for not investing. Try to invest alongwith your loans.
- Use common sense and be willing to be a contrarian. But don’t be a contrarian just for the sake of it or to sound intelligent.
I have not mentioned anything about insurance here as the focus is wealth creation. But that is definitely important and a must, if you want to protect your wealth from bad luck.