 (1).png)
Investment Strategy Basics: A Beginner’s Guide to Smarter Investing
What is investing? Investing is the act of allocating money into financial instruments, assets, or ventures with the expectation of generating a return over time. Whether you're investing in the stock market, mutual funds, real estate, or even your own business, the ultimate goal remains the same—wealth creation and financial security.
But for beginners, investing can be an overwhelming concept. You might be asking:
This guide breaks down the basics of investment in business and personal finance so you can start your investment journey confidently.
The answer is: it depends. There’s no universal rule about how much you should start investing. The amount varies from person to person, depending on several key factors:
As a general rule of thumb, many financial advisors recommend the 50-30-20 rule—allocate 50% of income to necessities, 30% to wants, and 20% to savings and investments. However, you can tailor this ratio to fit your own financial condition.
If you're wondering “What is the best time to invest?”, the short answer is: as early as possible. Thanks to the power of compounding, the earlier you begin investing, the more time your money has to grow.
But timing isn’t only about age—it also refers to choosing the right time for the right asset. For example:
Your age also plays a role in your investment strategy. Younger investors can afford to take more risks and allocate more to equity markets. Older investors approaching retirement may prefer fixed-income instruments like bonds or national savings schemes.
How often you invest can influence your long-term returns, especially if you’re following a disciplined strategy. Based on your income stability and financial goals, you can choose to invest:
If you receive a regular salary, a monthly investment is often the best strategy as it aligns with your cash flow and allows for rupee cost averaging, which reduces the impact of market volatility.
You can also adjust the frequency of your investments as your life goals change. For example, you may start investing small monthly amounts in your 20s and move to larger quarterly or lump sum investments later in life when your income grows.
Understanding how to invest is as crucial as knowing where to invest. Two of the most basic and widely used methods are:
This strategy involves investing a large amount of capital at once. It’s suitable for investors who have windfalls, such as bonuses, inheritances, or proceeds from selling an asset.
A SIP involves investing small amounts at regular intervals—monthly or quarterly—into mutual funds or stocks.
Your choice between SIP and lump sum depends on your financial situation, investment horizon, and risk tolerance.
Investing is not a one-time activity. Once you've built your investment portfolio based on your goals, risk profile, and asset allocation, you need to monitor and rebalance it periodically.
What is portfolio rebalancing?
Rebalancing is the process of realigning the weightage of assets in your portfolio. Over time, some investments may outperform while others underperform, skewing your original allocation. For example:
This could increase your exposure to risk. Rebalancing involves selling a portion of the over performing asset (equities) and buying more of the underperforming asset (fixed income) to return to your original allocation.
When should you rebalance?
Rebalancing helps maintain the risk-return balance in your portfolio and ensures your investments remain aligned with your goals.
While there are many avenues for investment, the four broad asset classes that every investor should know about are:
Diversifying across these four types helps manage risk and optimize returns.
By mastering these fundamental principles, you'll be better equipped to make strategic decisions, manage risk, and grow your wealth over time.
Ready to start your investment journey with Azee Securities? Open a Stock Trading Account and gain access to the Pakistan Stock Exchange (PSX). Let Azee Securities help you make informed decisions. Our expert advisors, advanced trading platform, and real-time market data ensure you stay ahead of the curve.
Azee Securities Private Limited
Member Pakistan Stock Exchange | PMEX | NCCPL | CDC
SECP Registered & Regulated