The Top 10 Tips for Successful Investing

1. Start Early - the sooner you invest, the more time your money will
have to grow. If you delay, you will almost certainly have to
invest much more to achieve a similar result.

THE DIFFERENCE TIME CAN MAKE

If you started investing Rs 5,000 a month on your 40th birthday, in 20 years’ time you would have invested Rs 12 lakhs. Growing at an average of 7% a year, it would be worth Rs 25,52,994 when you reach 60. If you started investing ten years earlier, your Rs 5,000 each month would add up to Rs 18 lakhs over 30 years. Assuming the same average annual growth of 7%, you would have Rs 58,82,545 on your 60th birthday – more than double the amount you would have received if you’d started ten years later! The bottom line - your investments gain most from compounded interest when you have time on your side.

2. Keep some cash aside – it is always a good idea to have some money set aside in case
of emergencies. Enough to cover three months’ living expenses is often a rough guide to how much you need. And make sure you can withdraw it when you need to, without penalties.

WHY YOU MAY NEED YOUR MONEY AT SHORT NOTICE:

• making a major purchase
• taking an unplanned holiday
• for an emergency such as sudden hospitalization

3. Ask yourself how much risk you can take – there is no point having a stock market investment if you are going to lose sleep every time share prices go through a rough patch. It’s vital that you are realistic about your appetite for risk – an Investment Adviser may be able to help you decide how much risk you can tolerate.

"In many ways, the key organ for investing is the stomach, not the brain. What is your stomach going to do when an investment your brain selected declines for a year or two?"

4. Bear in mind that inflation will eat into your savings – returns on risk-free cash investments may sound respectable, but when you subtract the current rate of inflation you may not be so impressed. For significant long-term growth you need to make your money work harder.

INFLATION - THE TICKING TIME BOMB

If you have Rs 10,000 in a savings account earning 3% interest each year, in 20 years time, your savings would be worth Rs 18,061. That’s a return of just over 80%. However, if inflation is
about 7%, Rs 18,061 would only be worth Rs 4,668 in today’s terms!

5. Think carefully about how long you will be investing for – only look at the stock market if you are prepared to put your money away for five or ten years, or perhaps even longer. If you are likely to need your money any sooner, keep it in a lower-risk investment so there is less chance of a fall in value just before you make a withdrawal.

“If you’re going to need money within the near future to put a down payment on a house — the
stock market is not the place to be. You can flip a coin over where the market is headed over the
next year. But if you’re in the market for the long haul — five, ten or twenty years — then time
is on your side and you should stick to your longterm investment plan.”

6. Spread your money across a range of investments – it’s rarely a good idea to have all your eggs in one basket. Depending on your goals and attitude to risk, you will probably want
to spread your money across different types of investment – equities, bonds and cash. You may also want to diversify within each of these categories. An equity fund, for example, will invest your money in a variety of companies but you may want to ensure you have a range of industry sectors too.

ADVANTAGES AND DISADVANTAGES OF THE VARIOUS ASSET CLASSES

CASH – ADVANTAGES
• High security and liquid
• Interest will always be paid
CASH – DISADVANTAGES
• Interest rates vary
• Best rates often have restrictions
• May not beat inflation
BONDS – ADVANTAGES
• Fixed interest paid regularly
BONDS – DISADVANTAGES
• Bond issuer may default on interest payments
• Value of a bond may fluctuate
EQUITIES – ADVANTAGES
• Equities can increase significantly in value
• Can outperform other asset classes over the long term
EQUITIES – DISADVANTAGES
• Equities can also fall significantly in value
• Difficult to predict what will happen in the short term

7. Invest regularly – investing regularly can be a great way to build up a significant lump sum. You will also benefit from what is known as rupee cost averaging. This means that, if you are investing in a mutual fund, over the years, whether the market goes up or down, you will pay the average price for units.

8. Choose your funds carefully – you should select investments based on your personal
circumstances and goals. If you are investing in a mutual fund, don’t opt for the flavour of the month, unless you are sure it will be right for you in the future. Don’t assume all funds investing in Indian equities are the same – look at what a fund invests in and check if you are comfortable with its investment style and objectives.

9. Remember that time not timing is the key to successful investing – when planning an investment, it can be tempting to wait for the market to drop. But you run the risk of missing out on the rises that often occur in the early days of an upward trend. In Fidelity’s experience, even the experts cannot “time the market” consistently well. It is better to choose an investment that you feel confident about and take a long-term view, so that you have time to ride out any ups and downs.

10. Review your investments – a portfolio that is right for you at one point in your life may
not be quite so suitable a few years later. Your investments need to adapt to changes in your circumstances, such as getting married, having children or starting a business. It’s also a good idea to check that each of the funds in your portfolio is living up to your expectations. Talking to an Investment Adviser could help you decide whether you need to switch money between funds.

GETTING THE RIGHT MIX

For the greatest long-term growth potential you could invest all your money in equities. But this could be a high-risk strategy as the markets could dip just before you need the money. You may need to think about making changes to your portfolio over time. You could aim for strong growth in the early years, and then, lock in gains you may have made and move into lower-risk investments. As you get closer to needing your money, bonds and cash investments could be your emphasis.