Whichever way you plan to invest, this section will give you some tips and techniques to get you started

Understand why you are investing.

One of the keys to successful investing
is identifying your investment goals, and the time frame over which you will invest. What do you want to do with your money?
# Do you want to save for a goal?
# Do you want to invest a certain amount?
# How long do you want to put that money away for?

Your goals and time frame

When investing money, many people have a specific goal in mind. If this is the case for you, you need to decide what time frame is attached to that goal — short term, medium term or long term?
# Short term (1–3 years)
# deposit on a home
# overseas holiday
# new car
# starting a family
# Medium term (3–7 years)
# boat
# house renovations
# Long term (7+ years)
# children’s education
# deposit on a holiday house
# retirement

Rather than having a particular investment goal, some people may just want to invest a sum of money, for example, an inheritance. If you are in this situation, you need to decide what you want from that money. Do you want to use the money in the next year or two? (in which case you are a short-term investor).

Or do you want a regular income? Or do you want it to achieve capital growth over the long term?

A short-term investor would be more likely to choose a more conservative investment like cash, to ensure that their capital is available in the next one to three years when they need to access it. A long-term investor would be more willing to invest in growth assets such as shares, as they do not need to access their capital for at least five years, so are usually less concerned about short-term ups and downs. They recognise that the potential returns are higher in growth investments, and if they are held over the long term the risk associated with short-term volatility is reduced.

Don’t forget that superannuation is one of the most tax-effective ways to invest for the long term. If you would like more information on superannuation, contact your financial adviser.

In considering which type of investment is most suitable for your goals, a professional financial adviser can help you with this decision after analysing your investment objectives, particular needs and financial situation.

2. Become an investor instead of a saver.

Many people invest but only some become wealthy. Why? The mistake many people make when investing is that they treat their investment as saving. So what is the difference between saving and investing? Saving is what you do to build up funds for something, like a holiday, and when you have the amount saved, you withdraw your capital from your investment and spend it.

Investing is different. People who want to build wealth invest their money for the long term in growth assets, such as shares and property. Their strategy is to spend the income that the investment produces, but leave the capital invested. They don’t withdraw the capital, so it stays there to grow, which in turn allows more income to be produced.

If you do this it will take you a while longer initially to get to your investment goal, but in the long run you will find that the extra wait has been worth it. As the years go by, you may have an increasing additional income stream from your investments and your standard of living can rise accordingly.

So what’s the secret to becoming wealthier? It’s easy! Start investing, and stay invested.

Other Tips to Remember…

Start early and take advantage of compound interest.

There is always a ‘good’ reason for not investing, but there is actually an even better reason to start investing right away. In fact, starting sooner rather than later is one of the best investment decisions you can make. The reason? So you can take advantage of compand interest. The problem is that compound interest works against those who hesitate. Most of us studied compound interest at school, so we know how it works. But it’s not until you start looking at practical examples that you realise how powerful it can be.

Use market movement to your advantage.

Dollar cost averaging – One way to ride out the market’s ups and downs is a technique called dollar cost averaging, typically used in managed funds. With dollar cost averaging, you don’t have to focus on where share prices or interest rates are headed. You simply invest a set amount of money on a regular basis. Dollar cost averaging is an investment technique that can help turn the odds in your favour. The idea is that you buy less units when the market is up, and more units when it is down — automatically.

Don’t try to time the market.

One of the excuses many use for not investing is that it is not the right time to invest. These people are likely to be under the misconception that they have the magical powers to be able to predict the future. They are under the illusion that the path to riches is a matter of getting on the right horse at the right time.

However, as investors begin to learn the vagaries of markets, they begin to realise the insurmountable difficulty in picking market movements. Trying to pick the magnitude and direction of market movements has cost even the most experienced investor dearly. Don’t chase returns.

Investing in the fund that had the best performance last year may be a big mistake! Most fund managers will offer you a choice of many different types of managed funds, from shares and property to fixed interest and cash, to mixtures of all of them. There are also usually a range of different share funds investing in different parts of the world. Given such a wide choice of investments, and the ability to switch your investments between them for little or no fees, some people make the mistake of chasing returns.

Chasing returns means that you are moving your investments across to the fund that had the best performance last year. Why can this be a mistake?

INTRODUCTION

One of the outstanding features of globalization in the financial services industry is the increased access provided to non-local investors in several major stock markets of the world. Increasingly, stock markets from emerging markets permit institutional investors to trade in their domestic markets. Indian stock market opened to Foreign Institutional Investors in 14th September 1992, initially with lot of restrictions. The regulation on them are liberalized and minimized now, since 1993 has received a considerable amount of portfolio investment from foreigners in the form if FIIs investment in equities. This has become a turning point of India stock market. The government of India announced the policy of the government to permit the FII investment in India capital market. According to the SEBI modified the regulation on 14-11-1995. In order to make investment in India equity market they wanted to register with Security Exchange Board of India as foreign institutional investors. It is possible for foreigners to trade in India securities without registering as Foreign Institutional investors, but such cases require approval from Reserve Bank of India or the Foreign Institutional Promotion Board. They are generally concentrated in secondary market.

Domestic market alone not able to meet the growing capital requirement of the country and financing from mutilated institution has lost primary in the emerging in the global order .Besides aimed primarily at ensuring non-debt creating capital inflows at a time of extreme balance of payment crisis. It was to tie over the balance of payment crisis in the early 1990s

Portfolio flows often referred to as ‘hot- money’ are notoriously volatile capital flows. They have also responsible for spreading financial crisis causing contagion in international market. Evan though, the FIIs have been plying a key role in the financial markets since their entry into this country. The explosive portfolio flow by FII brings with them great advantages as they are engine of growth, lowering cost of capital in many emerging market. This opening up of capital markets in emerging market countries has been perceived as beneficial by some researchers while others are concerned about possible adverse consequences.

Clark and Berko (1997) emphasize the beneficial effects of allowing foreigners to trade in stock markets and outline the “base-broadening” hypothesis. The perceived advantages of base-broadening arise from an increase in the investor base and the consequent reduction in risk premium due to risk sharing. Other researchers and policy makers are more concerned about the attendant risks associated with the trading activities of foreign investors. They are particularly concerned about the herding behavior of foreign institutions and the potential destabilization of emerging stock markets.

This study addresses these issues in the context of foreign institutional investors’ (FII) trading activities in a big emerging market – India. India liberalized its financial markets and allowed FIIs to participate in their domestic markets in 1992. Ostensibly, this opening up resulted in a number of positive effects. First, the stock exchanges were forced to improve the quality of their trading and settlement procedures in accordance with the best practices of the world. Second, the information environment in India improved with the advent of major international financial institutional investors in India. On the negative side we need to consider potential destabilization as a result of the trading activity of foreign institutional investors. This is especially important in an emerging country that has embarked upon reforms to open up its market.