The One Liner

What Kind of Investment is Best for Beginners?

Currently, the world is going through Multiple Shock waves of Covid 19, War, Inflation, Quantitative tightening, and initial signs of a Recession. People may argue if it is fair to talk about Investment in Equity Market for beginners or not.

The initial reaction may be to protect yourself and your money; even many might think of selling the whole portfolio and leaving the market for good. But we fail to understand that even in adverse conditions, there are opportunities in the Equity market.

Do you Know? There is a saying that


Those who invest in bear markets reap the benefits in Bull markets. “

This doesn’t mean one has to throw oneself in one go, as you never know a bear market may last for more than one year.

So what should we do? An investor’s journey should be consistent and full of patience and discipline.

There are Two Types of Equity Investment

Smart SIPing in Mutual Fund

Investing in index funds such as Nifty 50 and Nifty Next 50 (similar to NASDAQ ETF or S&P 500 in the US) and one large cap or Flexi Cap Fund would be better. Collectively these are good enough to participate in the growth of the Indian economy and the companies and do well in your investment journey over the next 10 to 15 years. If we look at the historical equity mutual fund returns in the last several decades, it consistently provides a CAGR of more than 10-12% over more than 5-7 years. One can invest in Mutual Funds through SIP up to 40-50% of monthly savings, and occasionally when the market corrects more than 10%, one can top up the mutual funds through a lump sum amount. However, Investment should be small and staggered over several months; We can call this kind of Investment Smart SIPing.  

Related: Struggling to Invest? Learn more about ‘Systematic Mutual Fund Investment Plan’ in India and Thank us later for that

Basic Requirements to start investing in the Indian equity market.

One would require a Demat account to start investing in the Indian equity market. We can make mutual fund investments by registering on the mutual fund websites along with KYC formalities or even through ISA (Investment services account) through your savings bank account.

Please note that when you invest directly through mutual fund websites, you save on commissions paid to banks and brokers. But for investments into stocks or ETF (Exchange traded fund), the Demat account is mandatory. One can choose from the top large reputed brokers in the country. These days account opening is online and takes less than 10 min; you need soft copies of your Pan Card, Aadhar card, photo, and signature. You would also require an active bank account linked to the Demat account. Once you set up the account, you can transfer money and start your investing journey. But it is advisable to go very slow in equity investing; believe me, you will not miss the bus.

But What about the Remaining 50-60% of your Savings?

Invest it in FD, RD, Bonds, liquid funds, or gold and relax. Use some of it in a volatile market when blood is on the street.

Stay away from thematic funds until you know the sector well and can identify the cycle. You would have never made good returns by SIPing in Pharma during 2014-15 and real estate and infra in 2005-07 as a down cycle followed for several years.

So SIP is not right in all situations. 

Stay away from investment advisors who consistently advise SIP in thematic funds for the long term, especially when the sector has reached the cycle’s peak. Deep cyclical sectors, after they peak out, may take even ten years to return.

For example, Infra and Real Estate Cycle peaked during 2006-08. These companies remained down for a decade; only in mid-2021 did they improve.

Routes of Direct Equity Investment

If a person wants to take a relatively higher risk to get higher returns and is willing to spend at least a few hours per week studying the markets, they may directly invest in stocks.

Few Suggestion While Making Equity Investiment

Few Things that Beginners should Never do in Investment Market

Final Thoughts

It is essential to know yourself, your risk-taking appetite, investment style that suits you. Therefore it is better to spend the first few years reading books, doing courses, gathering knowledge, SIPing in Mutual funds, and knowing yourself.

After a few years, one can choose if they want to invest directly in stocks and what kind of stock or in Mutual Funds.

Spending time in the market and going through a cycle provides an investor with the complete picture; till then, mutual fund SIP Sahi hai.

The above conservative methods, systematic approach, and caution should not scare you from equity markets. Accept the reality of equity investing and take advantage of the risk and reward it provides. 

Equity investment creates higher returns and makes you rich, but it takes time, patience, correct temperaments, discipline, and a regular source of income to feed the SIP.

(Disclaimer: This article is only for educational purposes and not investment advice. I am not a SEBI registered Financial advisor; please consult your financial advisor before investing in any stocks or mutual funds.)

List of Books for Further Reference:

Did you know?

Patachitra art is also very famous and part of the Culture in Orissa. Odisha’s  Pattachitra is a centuries-old folk art style from rural Orissa based on Hindu mythology and mainly inspired by Jagannath and the Vaishnava sect.

Jammu Navani

Rajiv has worked for more than 15 years with Big 4 and other Multinational companies such as KPMG, EY and C&W in research and consulting role. His educational qualifications include BTech from NIT Nagpur and Masters in Construction Management. Apart from his primary expertise in real estate business, he is passionate about personal finance and stock markets. He is avid reader and researcher who enjoys sharing his learnings in the field of personal finance and capital markets.

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