Investment Planning in Early 20s
As Experts say, “You don’t have to be rich to start investing, you have to invest to become rich”. Following are the ways in which you can begin Investment Planning in Early 20s:
Secured Financial Future
When you start early, your risk taking capacity is usually high. You do not have dependents at an early age. So, when you invest in such funds where the risk is high, you can also expect higher returns. Also, the benefits of compounding can be reaped early in life. This way when you start investment early in life, you are giving yourself a secured financial future.
Budgeting before Investing
Before we move on to the investment options, it is important to do budgeting.
Early 20s is the time you have just started earning. And, it would be very wise if you keep an account of every penny spent. When you have a clear view of your expenses, it becomes easy to calculate the amount of savings.
When you have a proper budgeting, it helps you to manage your money wisely and you can then be consistent with your savings.
Investment Portfolio for Early 20s
As a financial planner, we take into account many aspects before designing a complete investment portfolio for anyone. This includes
2. Current income and expenses
3. Goal of investment
4. Time period
5. Risk appetite
Where you invest your money is as important as savings. As a beginner, it is always advised to consult a certified financial advisor.
For your information, we have provided details of some of the best investment options available in the market for Investment Planning in Early 20s
1. Mutual Funds
You can start with as small as Rs500 with mutual funds. The mutual fund industry is very diverse. The best part of investing your money in a mutual fund is that it is managed by professional fund managers who take care of where the investments are to be directed to earn higher returns.
SIP (Systematic Investment Plan) is highly recommended for beginners instead of lump sum investment.
There are different types of mutual funds according to the requirements of the investor.
- Debt Funds
- Equity Funds
- Balanced Funds
- Multi Cap Funds
- Diversified Funds
The risk factor varies for each type of fund.
So, while designing your investment portfolio, some important aspects are planned upon beforehand.
Factors to consider before investing in mutual funds
Your investment goal – It is important to have a clear goal before you start investing. This helps to choose the funds properly and fulfill your goals. There can be multiple goals like Saving for studying abroad, saving for your dream home/ car, saving for a lavish retirement life etc. When you have a goal, your money can be put to work towards fulfilling your goals.
Risk taking – The amount of risk you are willing to take plays a very important role in deciding the investment options. There are different types of funds which have low risk, moderate risk and high risk. So, according to your risk appetite, funds suggestions can be made.
Investment duration – The time period of your investment can decide how much wealth you can create in the given time frame. It is needless to say that, the longer the investment period, the more wealth can be generated.
A finance expert can help you to design a diversified portfolio in which some amount is kept for liquidity, some is parked for emergency funds, some is invested in high return funds and accordingly adjusted as per the requirements.
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Public Provident Fund
If you want to play safe, then you can invest in a Public Provident Fund. The returns are higher than Fixed Deposits. Also, the interest earned is tax free.
To know all about PPF and how it works, watch our YouTube video – https://youtu.be/HW07P7yXFWU
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