What are the best ways to invest money?

The answer has been written primarily for the Indian audience. Others may find the general guidelines useful.

Someone recently asked me about my mutual fund investments and where to invest in the current markets which are highly volatile and speculative. My suggestion is to not waste time worrying about the market's ups and downs. If you are a long-term investor (3 - 5 year horizon), then you don't have to bother about finding the best time to enter the market.

A 2% dip today won't make you a fortune in the future, but a distraction and time wastage today from your core work is surely going to impact your tomorrow.

A few general rules that I follow:

• First invest, then spend the rest. Aim to invest no less than 1/3rd of your take-home salary. If you are currently lesser than that number (1/3rd), gradually aim to reach there.
• I don't waste time timing the market. No one can predict the market and therefore, it is best to invest on a regular basis so that the highs and lows are normalized. For this, I have active SIPs in multiple mutual funds.
• I invest in high-quality blue-chip growth stocks. Currently, I already have exposure in small caps via ESOPS of Exotel. No point in increasing small caps proportion via investments also.
• I hardly do direct stock trading. I prefer to invest, that too for a long term period (at least 3 - 5 years) via Mutual Funds only. Stock Trading, according to me, is more like full-time work because it requires you to actively look at the markets on a daily basis. On the other hand, if you are a long-term investor, you can invest and monitor your portfolio may be on a monthly, or better, quarterly basis.
• I don't listen to any tips and advice from random people, including my Investment Manager. When my Investment Manager sends me any investment recommendations, I ask her to send underlying holdings. If my first reaction is negative, I don't think twice and I straight away reject the advice. My gut feeling has saved me many times!
• One of the best investments according to me are Index funds - funds that invest in Nifty or Sensex. They have an extremely low expense ratio and they follow the index directly. The index is a reflection of the top companies (by market cap). These companies may not have huge growth potential because they are already quite large. However, they provide steady long-term returns with low volatility - something I want from my stock portfolio.
• According to me, investing should be passive - it should not take your time. If you are spending more than a few hours per week on this, you are probably doing it wrong.
• I avoid investing in extremely volatile assets like Cryptocurrencies. I am not saying that they are bad. Just that it is something I personally avoid because I don’t believe in Crypto as of now. This belief might change in the future.
• I tend to keep the next 12 months' expenses as liquid investments - fixed deposits and savings accounts (some banks provide a 5% savings account interest rate). Many experts say that if one’s age is X years, then they must keep X% of their portfolio in debt/liquid instruments. I don’t really believe in such generalized thumb rules though.
• Sometimes, I do take random high-risk small-ticket exposures. For instance, my Investment Manager had last year told me of a random unknown stock in which I invested a small amount. After 1 year, it doubled in price. As per my Investment Manager, it is a great quality stock and she had done her analysis on it. Anyway, I didn’t bother spending too much time studying it because I only invested a small amount.

Overall, my investment philosophy is to invest in such a manner that I don’t have to spend time worrying about them on a regular basis.

My belief is that my full-time occupation is going to create wealth for me. Investments will only help grow it.

PS: I haven’t shared any names of any mutual funds, or banks, only because I don’t want to provide any financial advice here. I am merely sharing how I invest my own money. Others may have a totally different opinion. I am open to feedback.