For first-time investors, there are some common fears that make decision making difficult. Let us analyze a few of these and see how first-time investors can tackle them:

Why should I invest if my money is not safe? 

The general impression about equity as an asset class is that the volatile nature of the stock market can make one lose one’s capital. No doubt, equity markets can be volatile over the short-term, however, over the longer term the stock markets tend to go up. The good thing about equity invest-ing is that the ‘risk’ can be minimized by adopting a proper strategy to invest as well as by building a portfolio of quality equity funds. However, a haphazard approach to investing as well as selection of funds can prove quite risky. 

Therefore, an investment in an equity fund should be made essentially for the long term and not to become rich overnight. It is important to understand the consequences of your decisions and do not allow emotions to dictate them.

Isn’t the current level too high to invest?

Whenever a first-time investor makes up his mind to begin investing in equity funds, the one thing that both-ers him is the market level. If the markets are doing well, invariably the question that comes to his mind is whether this is irrational exuberance in the stock market or is there some steam still left in this rally. On the other hand, if the stock market is going through a correction, the pessimism all around makes him nervous. 

For a serious long-term investor, whose objective is to build capital over time, the right way is by following a dis-ciplined approach without giving too much importance to the current market levels. That is because investing in equity funds is a long process and not a one-time activity. 

Do I have enough money to begin investing?

Another factor that often deters investors from starting the process is the general impression that one requires a large sum of money to do so. The fact, however, is that one can begin investing in equity funds through a systematic investment plan (SIP) with even a sum as small as Rs. 500. Besides, a disciplined and a long-term approach helps an investor avoid timing the market and benefit from ‘averag-ing’ as well as ‘compounding’. 

Once an investor enrolls for an SIP, it is important to continue with that for years and even increase the amount as and when he is able to do so. Remember, equity funds are your best bet to build a lump sum to achieve any of your long-term investment objectives like buying a house, to provide for a child’s education and to ensure a comfortable retired life. While you may experience lots of ups and downs during this marathon race, you need to carry on.

Which fund to invest in? 

Though the scheme selection should be the final step in the investment process, many investors make this as a first step and end up developing a hodgepodge portfolio. One of the most common ways employed by investors for selecting funds is to invest in top-performing funds. Though there are benefits of following the market leaders, there is no guaran-tee that the past performance will continue in future. While it may not be prudent to completely ignore these top-per-forming funds, it is essential to understand their strengths and limitations before investing in them. [PAGE BREAK]

A new investor should begin with diversified funds. Investing in existing funds, rather than the New Fund Offerings (NFOs), can be a good idea. Remember, existing funds have a track record and a portfolio to ascertain the quality and the future prospects. 

Also, avoid investing in a fund just before it pays a divi-dend. It is important to understand that dividend payments by funds are a process of distributing gains to its unitholders and only those who remain in the fund for a considerable period benefit from it in the real sense. 

If you are an investor waiting to invest in equity funds, the sooner you get over these fears, the better it would be. Succumbing to these fears can have a detrimental effect on the growth of your hard-earned money.