Ask MumbaiTrader – 28th January 2012.

I am a 32 year old software engineer working with a leading IT company. I bought a flat and am paying EMI on it. I want to start investing in stocks. I have heard that it is possible to make high profits in daytrading, I am comfortable with software and computers. Should I try to do day trading?

Congratulations on buying a house and planning your next investment steps! However, day trading is extremely risky especially for new investors.

Day trading requires 2 major items – i) stock analysis skills ii) Extensive time investment – day trading is often a full time job! If you are seriously interested in day trading, you should begin with practising stock analysis in a practice trading environment like the one at http://mumbaitrader.com/Trade.aspx

From an investment perspective, you can begin with investing in stocks or mutual funds with a long term horizon. Choose stocks that are low risk and that have long term growth prospects.

I will be retiring this year and will be getting a lumpsum as a retirement benefit. I am trying to decide how to invest this amount. The banks are offering a good rate on fixed deposits. I have never invested in stocks, but my colleagues tell me that it is a good way to invest my money. Is this a good idea at my age?

Growing your retirement funds is a very important task, especially if you do not have  a regular pension. With life expectancies increasing, it is quite a challenge to make sure your retirement funds grow enough to meet all your needs.

If you were to live another 20 years, you will need this money for regular expenses as well as large ticket items like healthcare etc. Assuming that the bank interest will cover your regular expenses, you’ll still need to grow the principal to meet your other needs.

Investing in stocks is a good way to achieve this target. We will recommend investing in low to medium risk mutual funds and stocks with a 1-5 year horizon.

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