Steps to follow before you start investing

To some, investing comes naturally, while, others struggle to start. The golden rule of investing says - the earlier you start, the larger will be your corpus for your golden years. However, many people start thinking to invest at a later stage. The reasons people start investing late is because of the risks involved while investing. Hence, it is important to have a good knowledge before you start investing.

The following steps will help you to prepare for investing.

First Step: The first and the most obvious step to start investment is you should have a stable income source.

Second Step: It is important to check the amount of money left after paying all your basic financial obligations like fixed expenses and debts or EMIs.

Third Step: Consider your future financial obligation: Before starting to invest, you should also consider your future financial obligations. Depending upon your age and stage of your life, you can have several expenses such as marriage, children education and their marriage etc.

Fourth Step: Build emergency fund: Before you start investing, you should first build your emergency fund. This fund should be enough to cover your expenses of 3-6 months including debt repayment and other recurring expenses.

Fifth Step: Know your risk tolerance: Before you start investing, you should know your risk taking ability. It will help you to select right product. For example if you are risk aversive, debt fund or large cap dedicated equity fund might help you.

Sixth Step: Set realistic expectation: Different products provide different returns and carrying risk accordingly. Hence, before investing you should understand the risk return profile of the instruments.

If you follow the above steps, it will help you to prepare yourself to start investing.