Investing for Beginners: How to Start Investing?

According to an Economic Times report, India's total number of demat accounts reached 16.2 crore as of June 2024. It is expected to increase at an average monthly addition rate of 34 lakhs in FY25. Thanks to the rise of finance influencers and greater awareness, more people in India are showing interest in investing and managing their finances. Young professionals and students are picking up on it, too.

More new customers are increasingly learning about investing, which helps them understand money and how the financial world works. These skills can set them up for better financial habits as they grow into adulthood.

If you're a beginner looking to start your investment journey, this quick guide will help you understand the basics.

Why should you start investing?

Starting to invest as a young professional or student offers several unique advantages. Time is your greatest ally. The earlier you begin, the more time your money has to grow through the powerful force of compound interest.

Investing early also serves as valuable financial education. It helps you understand the intricacies of financial markets, the importance of risk management, and the value of money. Moreover, investing early can give you a head start in building your financial future. Even small amounts invested consistently can accumulate over time, providing a solid financial foundation.

Step 1: Open a savings account

Before investing, the first step is to open a savings account. This allows you to save without worrying about maintaining a minimum balance, making it ideal for investors who are just starting out. The money saved in this account can be used for your investment portfolio.

Step 2: Learn the basics of investing

Understanding the basics of investing is necessary before putting your money into the market. Here are a few key concepts to start with:

• Stocks: They are shares of a company that represent ownership. Stocks have the potential for high returns but also come with higher risk.
• Bonds: They are loans given to companies or the government, which pay you interest over time. Bonds are generally considered safer than stocks.
• Mutual Funds and ETFs: These are collections of stocks and/or bonds. They allow you to invest in a broad array of assets with a single purchase, which can reduce risk.
• Compound Interest: This is the interest on your initial investment and the accumulated interest over time, which helps your money grow faster.

Step 3: Start small and diversify

It is important to start small and diversify your investments. Diversification means spreading your investments across different asset classes (stocks, bonds, ETFs, etc.) to minimise risk. As a beginner, you may not have much money to invest, but even small amounts can grow significantly over time.

Step 4: Use investment apps or platforms

Several investment platforms and apps are user-friendly and educational for beginners. Many apps allow you to start with a small amount of money and offer tutorials to help you learn as you go.

You can easily find the popular ones by a simple Google search - but be aware of the fake ones.

Step 5: Monitor your investments

Once you start investing, it is important to monitor your investments regularly. Keep track of how your investments are performing, read up on market trends, and stay informed about the companies or funds you've invested in. This doesn't mean you need to check the performance of your investments every day, but having a routine (like a monthly review) can help you make informed decisions.

FAQs

Can a 15-year-old buy shares?

Yes, a 15-year-old can buy shares, but since they are under 18, they will need a custodial or guardian account.

What is a good age to start investing?

There's no perfect age to start investing, but the earlier, the better. Students and young professionals have the advantage of time, which allows them to take on more risk and benefit from compound interest over many years.

What type of bank account works best for investing?

A savings account is a great starting point for investing, as it helps you set aside funds to invest later. A Zero Balance Digital Savings Account is ideal because it does not require a minimum balance, allowing you to save and allocate funds easily toward investments.

This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.