10 Replies to “I have a savings of Rs 75000. I am confused as to what to do with it. Trading or mutual fund or fixed deposit?”

  1. To Start Investing
    It takes a long time to learn the stock market and it would help if you read some books from your library and information online. It would also help if you did some practice trading with play money. You can do this by using a watch list in Yahoo Finance > My Portfolio. Just pretend you bought some shares of your choice. If you need help to set-up the watch list, let me know.

    No one can tell what you should invest in the market. You need to decide what’s right for you at the present time. Before you start investing, the first thing you need to decide is what risk level you want to take. CDs backed up by the government has about 3-4% annual return for the long term with a low risk. Bonds or Bonds Funds has about 5-7% annual return for the long term with a medium risk. Stocks or Stock Mutual Funds has about 8-10% annual return for the long term with a high risk and are more volatile than Bonds. A person can make more than 10% annual return with the right investment. Usually the more risk you take, the more return you will have, but not always.

    The stock market is basally made up of stocks and bonds. Investment managers pick a group of stocks to make a mutual fund or a group of bonds to make a bond fund. They even put a mixture of stocks and bonds together and call it a Growth & Income Fund.

    1- MUTUAL FUNDS: Mutual funds have a group of stocks (could be around 100+) invested in different sectors, and manage by a professional. Managers have lots of schooling for investing in stocks, around 8 years. So I think managers can pick stocks better than I can. There are lots of different kinds of mutual funds and they have different risk level. There are 100s of funds that does not charge any fees to buy it’s shares and they are called Noload Funds. There are also some funds called Load Funds that charge about 5% of your investment. You can make a buy or sell order anytime of the day for mutual funds shares but it will not go in affect until the close of the day. Most funds has trading restriction and you may not be able to trade more than 4 times a year. That’s because it makes it hard for the fund to make a good return if there is to much trading in the fund, causing the fund manager to make more buys and sells and keep more cash on hand. Mutual funds are meant for long term investors.
    2- STOCKS: Stocks is more volatile than funds unless you spread you money in several different areas and know witch area will do best. There are 10 stock sectors and over 100 sub-sectors to choose from. Stock trading restriction is only a few days, not like mutual funds. If you own stocks, you will need to keep up with all the company’s business so you don’t get stuck with a bad stock. That could take a lots of time. If a person buys just a few stocks he probably is hoping to make a bigger return but he may be taking more risk. If that’s the case, look at the leverage ETFs that represents a large group of stocks. That could be another choice.
    3- ETFs (Exchange Traded Funds): ETFs are like a mutual fund but trades like a stock and that is the main differences between ETFs and stocks and mutual funds. There are some ETFs that represents Index’s. An Index is like S&P or DOW. Index’s operate just like a mutual fund with a group of stocks in deferent sectors, manage by professionals. You can’t buy Index’s because they are not for sell. A company owns them. But you can buy a mutual funds or an ETF that has the same stocks as the Index they represent. There are a lots of different kinds of ETFs for someone to choose from. There are some that represent almost every kind of sub-sector. And there are some that have 1x leverage, some have 2x leverage for aggressive investors, and some has 3x leverage for more aggressive investors. If you wish you had more money to invest, the 3x is like having three times the amount of your money in the market. You will make more in an up market but lose more in a down market.

    To buy stocks or funds, you need a broker account. You can open an account online or in a broker house and it is free to open. You can find several good discount brokers that charge $8.00 and under per stock trade and no fee on Noload Funds. If you only have a small amount of money to invest, it may be best to start in Noload Funds because of the broker fees. Most broker websites have good research tools. Some popular broker websites are Fidelity, TD Ameritrade, E-trade, Scottrade and others. I think you need a min. of $500 (some sites $2,500) to open a broker account and need to be at lease 18 years old. If you not 18, you might could get your Dad to open an account for you.

    Self-taught from 24 years of experience.

  2. Hey,
    Let’s keep it short.

    Why don’t you diversify your funds?

    Lets say – 20K for mutual funds,10 K for Fixed deposit and with remaining 45K you can trade in stock market. What say?

    Honestly Stock market is quite complicated place where you can earn and loose money quickly. But trust my words if you tend to follow few share market trading basics and rely on research you will hardly fail. Try to gather as much knowledge as you can.

    Do remember its always better to diversify investment’s rather thn investing in one.

  3. As you don’t any experience of “trading”, invest your money in mutual fund units at present.

    Start learning more about investments, trading etc. Read a lot, discuss with experienced traders and investors. This should give you fair idea about trading etc. Once you will confident, withdraw some amount from mutual fund and start investments / trading on your own.

  4. share trading is best but you should be prepared even if the entire amount is lost
    you must be cleven to invest in shares
    2. mutual funds play with investors money they do tests with your money and nowadays they
    eat more percentage by so many ways
    3,bank deposits is the least and nowadays the make tds also if you have no other ways then only you can go for it

  5. If you have not done direct trading before you should not try directly
    Well ULIPs are a very good option, returns will be good & safe to invest.
    We have different plans which can give you good return, also some min sum assured.
    You can get back to me at [email protected] for more details.
    We can suggest you the best investment plan from various companys suiting your needs.
    Ruchi Kedia
    Richhpal Finacials

  6. SIP in good equity funds is one of the best ways of creating wealth however you should also keep a part of the money in fixed income instruments like FD. Here is what you should do:

    1. Do not go into trading. If you want to then just start trading with small amount like 5k – 10k just to test the waters
    2. Start SIP in another good fund. HDFC 200 is very good. You can select something like Reliance regular savings, or birla Sunlife frontline equity
    3. Invest the balance in FD.

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