Goals First. Investments Next.

by Vinaya HS on May 28, 2012

in Finance

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Here’s a question that I often receive –

Hi. I’ve recently started my career at a software firm. I earn Rs XX,000 per month. Being new to personal finance, I’m not aware of investment options for beginners. Could you please guide me towards suitable investment options?

Whenever I see such a question or an equivalent variant, my first thought is “Oops! Wrong way to approach one’s personal finances.” Investing is a worthy cause, but what are you investing for in the first place? Do you want to buy your first vehicle? Do you want to clear your education loan? Do you want to double your money overnight? Every investment that you make has to be driven by a “Why?”

It’d be very easy for me to blindly ask you to put your money in a balanced mutual fund or in a dividend yield fund or in the public provident fund. But without knowing that “why” you’d end up putting your money in the public provident fund when all you wanted to do was to save some money for a down payment on your bike.

So, sit down and identify your [financial] goals first (here’s a great starting point). Investments come much later.

And if you currently have no idea what you want to invest for, I’d recommend that you simply open a 1-month fixed deposit each month and keep renewing them till you figure the “why” out. By then, you’d have learned to save, to invest, to earn interest, and to make your money work for you.

Finally, I’m not sure if this problem is specific to the software industry — too much money too early in one’s career and no clue what to do with it all.

What do you think?




Thanks for reading this article. I'd love to hear your opinion. Please use the comments section below to share your thoughts. I frequently write new articles that also cover several other aspects of personal finance including credit cards, financial goals, health insurance, income tax, life insurance, mutual funds, retirement planning, and much more. You can Subscribe through Email and receive new articles directly in your Inbox or you can Subscribe through the RSS Feed and receive new articles in your feed reader.

{ 4 comments… read them below or add one }

rakesh May 28, 2012 at 9:22 PM

RD is also good way to start. Most banks are offering 9-10% for RD’s over 2 years.

Vinaya H S May 29, 2012 at 1:58 PM

@rakesh –

The reason I did not recommend anything else in this case is to avoid lengthy lock-ins especially when you’re unsure as to what you’d like to do with your money.

Rakesh May 29, 2012 at 10:33 PM

@Vinaya,

Got you but if you open FD for one month you would get only 4-5% interest rates but if you would open for 3 months you could get 7%.

GSK June 8, 2012 at 2:17 PM

But if you do not invest aren’t you loosing money on your corpus?

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