Investing one's hard-earned money may seem intimidating, but it's a critical step toward securing a financial future. The path to seeing the money grow lies in making smart investments. And the best time to start? The answer is simple: as early as possible. Why? Because time is the greatest ally in the world of investing. The earlier one begins, the longer the money benefits from the magic of compounding.

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Financial experts unanimously agree that before individuals dive into the world of investments, they should invest time in educating themselves.

The foundation of a successful investment journey starts with identifying long-term and short-term financial objectives. Investors should understand the corpus they aim to accumulate and the willingness to take risks to achieve those goals, experts say.

Investment options to start with

The investment universe offers a plethora of options for beginners. However, seasoned financial advisors advocate for a systematic investment plan (SIP) in a mutual fund as the ideal starting point. Mutual funds offer professional management, transparency, liquidity and cost-effectiveness. These factors make them an excellent vehicle for novice investors to initiate their journey.

Diversification is a key strategy that cannot be overstated.

Experts say that investments should be well-balanced between equity and debt based on the investment objectives. Once the investments are in place, it's essential not to be swayed by temporary market fluctuations that may affect the portfolio. Patience is the name of the game —given that investments need time to showcase their wealth-creation potential.

Creating a safety net is as important as investing. Before embarking on the investment journey, individuals should ensure they have an emergency fund ready. This fund should cover at least 4-5 months' worth of expenses. They can park this fund in a savings account or consider investing it in liquid mutual funds for easy accessibility, experts say.

Investment options to avoid

As individuals delve into the world of investments, experts say that not all avenues are suitable for beginners. There are some funds and strategies that first-time investors should avoid. These are:

F&O trading

The Securities and Exchange Board of India (SEBI) reveals that the majority of individual traders suffer losses in the Futures and Options (F&O) segment. A study showed that during the financial year 2022, 9 out of 10 individual traders incurred average losses of Rs 1.1 lakh. This highlights the high-risk nature of F&O trading, making it unsuitable for beginners.

Endowment plans

While these plans offer life cover along with fixed lump sums or income benefits, they come with high fees that eat into the returns, ultimately reducing profitability. For first-time investors, these fees can outweigh the benefits, experts say.

Thematic funds

It's advised that first-time investors should avoid thematic funds. Sectoral funds are riskier compared to diversified funds due to their narrow focus.

Diversified equity mutual funds are a safer starting point. Once investors have built a solid core portfolio and have a better understanding of risks, they can consider opting for thematic funds to generate alpha, experts say.