Small investment to start with

Investment options chosen by an investor depends upon the risk taking aptitude, the kind of investment, the maturity period, the rate of return, etc. Depending on the level and type of investment, you get returns. If you are low risk taking, you might have thought that Fixed Deposit or Post Office savings are the only options for you. But you must be aware that even a small investment can give handsome returns when investment in a mutual fund, government bonds, Gold ETFs, etc which are slightly high risk-taking.

If you are not sure if the volatility in the market will suit your needs and give you returns, start with a small investment and keep a daily check on the movement of the investment. You will soon find out that your investment is either giving you good returns or teaching you valuable lessons relating to the market.

Remember some basics about investing. The sooner one starts investing, the better. By investing early you allow your investments more time to grow, whereby the concept of compounding increases your income, by accumulating the principal and the interest or dividend in it, year after year. Also invest regularly and for a long-term. Because over a longer period you will observe that your investments are nullifying the lows in the market and your investment grows by leaps and bounds when invested at least for 5-10 year period.

To start with a low investment, you can invest in mutual funds where you can start investing with as low an amount as Rs.500 but achieve diversification of the stocks and also your investment gets managed by Asset Management Company (AMC). Mutual funds are considered to be safe investments and give you moderate-good returns. If you are high risk taking and understand the nuances of the market, then you can buy stocks of well-performing companies and increase your return on investment. Bank Fixed Deposits and Post office savings are of low risk and you can invest as much as you can to increase your returns. Your investment profile should comprise of a wide range of investments both low and high risk mostly with opposite correlation so that you are less affected by market volatility.

Your returns on the small investment and added to that your expertise in the market condition will drive you to invest more in areas where you anticipate to get better returns. Hence a small investment today becomes a larger investment with much better experience tomorrow. This is how the fundamentals of market work. So once invested, it becomes your responsibility to see it grow.

There are brokers and consultants who are guide or misguide you on investing. So, be cautious about them and form your own judgements by gaining knowledge from experts on the TV or internet. Also whether the investment is small or big, you need to carefully understand the documents related to the investment, verify their legitimacy, assess the risk-return profile of the investment, know the liquidity aspects, seek all clarifications, and explore other options available to you. All these important points help you tread the right path of investing.