4 Investment Tips For People In Their 20s
The twenties are the time when you start understanding the importance of saving, investment, and returns. This is the age when you start to have financial freedom and you slowly start taking responsibility for your own life.
So, if you have savings in hand, what’s the best way to invest and where? We will tell you.
Start Small, Earn Big
If you are in your 20s and new to your job, the best plan would be to start saving a small amount every month. Do you know that you only need as little as Rs. 500 to invest in Mutual Funds through a Systematic Investment Plan (SIP)?
A SIP is nothing but the strategy of investing a fixed amount periodically in Mutual Funds that are best suited for you, which will ultimately help you achieve your financial goals.
Invest in ETF (Exchange-Traded Fund)
ETFs are an excellent, convenient, one of the cheapest ways to take exposure to equities for investors who have long-term goals and want to invest in equity without taking too much risk. The diversity of an ETF makes it less volatile than an individual stock. More importantly, during volatile times, the draw-downs seen in an index fund are likely to be less sharp, unlike direct investing. By investing in ETFs, one can get market-linked returns without the additional stress of security selection or market timing. Also, ETFs are listed on the stock exchanges and can be traded (bought or sold) at any time during the market hours via a Demat account.
Incline Investment Goals With Tax Planning
Considering everyone who earns has an income tax liability, tax savings should also be kept in mind while making investment choices. By doing so, not only will you save on your tax liability, but you will also make the most out of your money.
Do make sure that you diversify your investments adequately in both market-linked products as well as debt instruments. Traditional tax-saving investments like PPF and Fixed Deposits usually don’t have the capacity to earn inflation-beating returns. Therefore, include ELSS (Equity Linked Savings scheme) in your portfolio to create a sizeable corpus and beat inflation. Sure, equity can be risky, but over long periods, the risks are minimized and you can earn higher returns as well.
Most importantly, build a contingency/emergency fund worth 6–12 months of your regular income. In case your regular income stops or during any emergency, this will cover your expenses. For this goal, you can invest in debt mutual funds, savings accounts, fixed deposits, and recurring deposits.
Adopt these simple steps and you will be on the road to financial freedom in no time. Happy investing!