Investment means putting your money in stocks, mutual funds, bonds, equity, real estate etc. It is done to achieve certain financial objectives (like paying for your higher education, purchasing a new house, securing your retirement etc) and to improve/maintain the standard of living even after your retirement. To ensure maximum returns with minimum risks, it should be done in a planned and systematic manner. This is known as investment planning or financial planning.
Following are the few tips to keep in mind while investing:
1) Before you prepare your financial plan, make sure you have clearly defined your financial objectives i. e. what do you want to achieve through your investment.
2) You should not directly invest in stock market/ shares unless and until you have through knowledge of it and are always up to date regarding the market condition, stocks prices, risks factors involved etc.
3) Invest in mutual funds. A mutual fund is a group of stocks, bonds, real estate, mortgages and other investments from more than one source which is professionally managed by an investment company for the benefit of the fund's owner. Each fund has certain financial objectives and the risks associated with it.
4) Putting up your money in the saving bank account is not an investment, as its worth will not grow considerably in comparison to the inflation rate. In fact the inflation will eat up your money over a period of time. So you should look for those investments which ensure greater, faster and secure returns.
5) Diversify your investment i. e.invest your money in various companies instead of just one company. This is essential for secure returns and safety of your money. Don't put more than 10% of your total investment in one company.
6) Don't invest all of your money. Keep some reasonable amount with you for emergency purpose.
7) You need to invest regularly. Investment is not something which you do just once and then relax for the lifetime. Not only you need to invest regularly but you also have to monitor it periodically say monthly. In this way you can take corrective measures as and when required.
Source: Interactive Whiteboards Lessons: The Basics of Investment