I have about five lakhs with me, so I know I can’t buy a house. I feel the stock markets are very risky so how do I increase my net worth by making safe and profitable investments?

Stock market is not a safe place for money. So better invest somewhere else.

So you have 5lacs, and you want to get yourself a fancy house. But of course you cannot rely on your current salary, and you decide to invest.

A word of advice -

“Don’t put all your eggs in one basket.”

There is no better time to use this expression to explain the situation. Taking risks is inevitable when it comes to share market and mutual funds. But what you can do is take a calculated risk. This way you will lose less money and will also be able to make more profits.

Fundamental analysis of stocks has to be done. You need to do your homework. The same homework which can take you 3 to 4 months as mentioned in one of the questions above!

If you are a new player in the market, then it is best to play safe. Consider giving 70 to 80% of your wealth to a respectable and reputed broker who can handle your money and make the best decisions for you. You can keep 20 % with yourself to learn and make an investment by yourself in the future.

Coming back to your 5lacs. You could consider investing 50k each in 10 different industries. Pick the ones which are doing well and have a good history. Oh yes, the history matters when it comes to stock market. But I would suggest for you to do this only if you know your cards well and are well aware of the stock world. If you think you cannot handle the pressure it is best to invest it in mutual funds through an organization like mentioned before. Investing in a mutual fund for 10 - 15 years can give you a good return.

You should understand and do return calculations before investing in any stock. There are a few methods of calculating the returns. But the best method is CAGR method. It is also called Compound Annual Growth Rate.

Whatever you chose to do don’t forget to study about the company, it’s philosophy, their ethics etc. before making an investment.

Start a SIP of 10k in mutual funds.

MF are subject to market risk.