HAVE A DESIROUS THURSDAY

CHOOSING AN INVESTING STYLE

There are no hard and fast rules in figuring out how much of your money you should invest in stocks, but there are a few simple guidelines that can make stock investing significantly safer and less risky.

Rule One - Never invest what you truly can't afford to lose:

This is just common sense. If you have Rs50,000 in total savings, don't put all Rs50,000 in your investment portfolio. Keep Rs10,000 to Rs20,000, or the equivalent of one or two months worth of living expenses aside at all times. 

No one can predict the future, and a small savings nest egg is one of the only certainties you can have. Obviously, the other extreme of keeping all your savings in cash is almost worse because inflation will eat away at your savings and leave you poorer than when you started.

Rule Two - Find the risk-reward balance:

Now that you know how much you want to put in your overall investment portfolio, you need to figure out how much of that will go into stocks. 

Your investment timeline is very important. Obviously, if you're young (say, under 40-45 years old) and you have up to 20 years or more to invest your money and ride out any short term swings, you can invest a significant amount of your savings in stocks. You could invest anywhere from 60-80% of your money (excluding the safety nest egg) into stocks and slowly move that money out into cash and safer assets over several years as you approach retirement.

If you're planning to retire in the next few years, obviously some of your assets need to be in safer, less volatile assets like bonds and gold. However, with life expectancies in the developed world reaching close to 80 years, realize that even if you are a recent retiree, you will still need your wealth to last you 20 years or more, and that means your investment returns need to consistently be outpacing inflation. Therefore, continuing to invest anywhere from 20-50% of your money in stocks still makes great sense, especially compared to just putting your money into a traditional savings account.

Rule Three - Do what feels right: 

Again, remember that at the end of the day, how much you're comfortable investing in the stock market is a personal decision that requires serious thought and consideration of your own risk tolerance and financial situation. Consider starting out with smaller investment amounts and then increasing your investment as you learn and gain real experience in the stock market.