Firstly, it's important to have a clear understanding of your investment goals. Are you looking to grow your wealth over the long term, or are you more interested in generating income in the short term? Investment options vary based on the time horizon.
Secondly, assess your appetite for risk. Some of us are comfortable with a higher level of risk, while others prefer to play it safe. This difference is known as your "risk appetite." Some investments are more risky than others, but they also offer the potential for higher returns. Risk and return are strongly correlated meaning higher the risk higher is the expected return without a guarantee of the return.
Your risk appetite is influenced by a number of factors, including your age, investment experience, and the amount of capital you have to invest. It's important to take some time to understand your own risk tolerance before making any major financial decisions.
This is a question that many people ask when they are first starting out in the world of investing. Most experts recommend that you invest at least 10% of your income in stocks and other securities. If you're willing to take on more risk, you may want to consider investing a larger portion of your income.
Deciding where to invest from many options is a daunting task. If you are new to investments, it is better to start with Mutual Funds SIP and then graduate to investment in direct stocks. As the old adage goes “never put all your eggs in one basket”, diversification meaning investing your money in multiple asset classes is the first principle of investment.
It is important to regularly (monthly or quarterly at least) review investments and make sure that they are performing as expected and that the portfolio as a whole remains well-balanced. Doing so will help ensure that investments are on track to meet the investor's long-term financial goals.