The Building Blocks Of How To Invest Your Money

When it comes to investing there is no dearth of advice online or offline from blogs or Twitter threads and friends to relatives, everyone seems to have an opinion on how you should invest your money. However, there is no standard cookie-cutter approach that can lead you to instantaneous wealth. Investing is an art and a science, and it is important to develop a the financial literacy needed before embarking on your financial journey. Here are some things you should know.

Why Should You Consider Investing?
Apart from drawing a regular salary, there are many other supplementary ways to make money. Investing is one of those ways; in fact, it is one of the best ways to help your money grow and make it work hard for you. Smart investing can become akin to a second source of income and eventually help you to tide over difficult times, save on taxes and help build a robust post-retirement fund.

5 Ways to Invest Your Money
Below are some of the most prominent tools and approaches that can help you to invest money wisely.

The Cookie Jar Method
Often used only in the context of blue-collar workers, the cookie jar method is an effective method for financial planning. In essence, it is a method of investing that allows you to save and invest in multiple buckets that are earmarked for different purposes.

Think of it from the perspective of a child saving up enough pennies in a jar from their pocket money to buy their favorite chocolate. An adult version of this would mean using high yielding online savings accounts or fixed deposits that are reserved for specific expenses. This seemingly child-like method is surprisingly effective as a first step towards allocation of funds and the management of expenses.

Consider Algorithm-based Advisors
Taking financial advice from algorithm-based apps and online platforms that are devoid of any human element may seem odd and unconvincing at first. However, robo-advisors use algorithms to draw-up detailed profiles of investors and then suggest personalized investment solutions. With the help of technologies such as artificial intelligence and deep learning, robo-advisors work to understand and eventually predict investor’s financial goals, preferences and determine risk.

Automated investment advice is a field that will gradually disrupt and improve the financial advisory space due to the high level of personalisation it offers. Also, they aren’t complicated to use and even novices can invest with the help of robo-advisors. They come in the form of inexpensive and user-friendly apps, and require slightly lower investment minimums than traditional investment firms. It is advisable to invest your money in a highly-diversified and low-cost portfolio consisting of good stocks and bonds.

Don’t Shy Away From the Stock Markets
The stock markets are traditionally seen as a volatile and risky investment hub. However, with a little bit of research into the basic principles of stocks and some self-set ground rules, it is possible to earn robust financial gains.

To begin with, investors can purchase a few shares and limit their exposure to risk. As you understand more about the nuts and bolts of trading in stocks, you can gradually purchase more shares and raise your stake in a company.
As an investment instrument, stocks are highly liquid in nature. Buying and selling stocks is fairly straightforward and can easily be done with a click of a button on your smartphone.
Enroll in a Retirement Plan
Retirement is no longer confined to those in their 60s. Gen Z has a whole different notion of retiring early after having created significant wealth so that they can pursue their passions while they are relatively young. Therefore, it is never too early to plan the process of retirement! Retirement planning involves the setting aside of money, investing it, and then directing it towards your retirement savings fund. You have to factor in spending habits, average life expectancy, and health conditions while calculating your retirement savings needs. An ideal retirement plan is based on three factors:

Life expectancy: In India, the general trend indicates increased life expectancy. While this is good news, living longer also means that you need to plan more carefully to ensure that you can live comfortably off your savings for the rest of your post-retirement life. This has to factor in increased health problems that are common with old age, assisted living facilities, home nurse and other medical expenses.
Inflation: In a developing country like India, inflation tends to be higher. Also, the pandemic has shown us that global events spurring market volatility are only going to get more common. Hence, while making retirement plans, you must keep in mind that the real cost of goods and services will rise in the future.
Digital Gold
While this might seem like an oxymoron considering how gold is always seen as a physical asset to be possessed personally. The concept of digital gold is fast catching up. Digital gold is essentially an online product that allows you to own gold without a bank locker or a safe to store it.

This means that a seller keeps an equivalent weight of physical gold in a safe/vault. The advantage here is that there are no minimum limits, so you can even buy gold worth INR 500 or INR 1,000. This can be done in the following ways.

Gold mutual funds and gold exchange-traded funds (EFTs) are an excellent alternative to physical gold.
You can also invest in digital gold as it is; 24K that is 99.9% pure gold with no wastage or making charges.
You can visit any of the platforms that offer digital gold investments such as GPay, Paytm, Amazon, HDFC Securities, among others.
Bottom Line
Investing money may seem like a series of daunting tasks initially. However, with the help of myriad online apps and platforms, investing has been made easier. Even starting with a small amount of money is a big step towards securing your financial future in the long-term.