If you are in your 20’s means you are fully enjoying your freedom. Perhaps, you have graduated and touched the adult lifestyle. You are fully employed, yet you may not have a mortgage to cover, a child to take care of, and a spouse to please.
This current time is carefree, but the adult time will be surrounded by the responsibilities. However, you can make your older adult age cheering and hassle-free if you do things right in your 20’s. The phase you are living is giving you the chance to set yourself up for life. However, investing in your 20’s may sound boring, but all experienced investors say, “The earlier you invest, the richer you get.
If you are ready to invest but not aware of the investment practices, let our investing 101 guide you in the right direction.
What is Investing?
Investing is the practice so that your capital gets the opportunities to work for you. There are so many ways to earn money. Growing up, most of us taught that you have to work if you want to earn money. But, investing is an act of growing money, not earning money. Earning comes from a job, and growth comes from investment. Just like earning, there are different ways to grow money, such as Mutual funds, Stocks, Bonds, Crypto, or Real estate.
Investing is not about throwing money at any random investment. You have to analyse the market, understand the best investment option that suits your risk appetite. And most importantly, please your lady luck every day.
Concept of Compounding
After nuclear force, compound interest is one of the strongest forces in the universe. But, it is essential to note that its power comes with time. In simple words, compounding means reinvesting the profits from investments to make your investments grow exponentially. If you want to retire early and financial freedom in the future, you have to harness this power and put it to work. If you avoid it, you will lose the gain that you never recover.
You can unleash the power of compounding by investing early. For example, if you started investing in the L&T Mutual Funds early, it gives you enough time to grow into a corpus that will help you achieve financial goals.
When you are in your 20’s, it is easy for you to afford things which others might not, at the age of ’50s and ’60s. If you are thinking of investing in your 30’s, then you will miss out on gains.
Best Investment Options for Beginners
There are plenty of best investment options out there in the market. But we have decluttered and come up with options that are suitable for beginners.
1. Public Provident Fund (PPF)
If you are the one who is not ready to take a risk but want to grow your money then invest in the PPF. It’s completely risk-free but associated with less profit. The excellent news about opting for a PPF policy is that the interest rate is fixed by the Government of India which makes it an ideal choice for long-term investment.
2. Peer to Peer Lending System
It’s no secret that the millennials are tech-savvy. Keeping this in mind, peer to peer lending system has been introduced to safeguard their interests. A peer-to-peer lending is a platform allowed to young investors for borrowing and lending purposes. The prime reason for the introduction of this type of investment policy is to tone down the risks of investments. In addition to this, peer to peer lending system acts as a link between the lenders and the borrowers.
3. Debt Mutual Funds
If you want reasonably steady returns, then you should definitely invest in debt Mutual funds. They are less risky compared to equity mutual funds and the right investment option for beginners.
4. Fixed Deposit
One of the most traditional yet the most trusted options of investment is Fixed Deposit. These fixed deposits are made available to the public at banks as well as commercial firms. While the interest rate of bank FDs is higher, the rate of interest provided by the commercial firms is reasonable.
5. Real Estate
A real estate investment is one of the most preferred best investment option. This is because of the fact that investment in real estate not only provides potential long-term security but might also provide a steady flow of income to the investors. Since investors believe that the value of real estate rises over time, they prefer sticking to the plan for the longest period to reap maximum benefits. If you’re interested in buying a property, you can utilize the generous amount of money from the real estate investment to meet your urgent needs.
6. Mutual Funds
A mutual fund is a common pool of money, where all investors invest their money. They invest in securities like stocks, bonds, and short-term debt. The combined holdings of mutual funds are known as a portfolio. When you invest in a mutual fund, its reach, and variety works in your favour, which makes the potential creation of wealth easier. SIP is one of the best ways to invest in mutual funds. This plan will help you to make small investments in mutual funds at regular intervals. You can use L&T SIP calculator to check your estimated return, on the investment
Investment is important because you can’t achieve your higher financial goals with a basic income. If you ask us which can be the best investment option for you as a beginner, we suggest investing in Mutual Funds. But its returns are largely dependent on a fund’s management ability and the market. So, choose an asset management company like L&T Mutual Funds that has years of experience in managing investment portfolios. Always have the habit of reading the scheme related documents before investing to understand the scheme type, investment patterns and the risk factors associated with particular investments and consult your financial advisor to understand the implication of any investment
Disclaimer: This information is for general information only and does not have regard to the particular needs of any specific person who may receive this information. L&T Investment Management Limited, the asset management company of L&T Mutual Fund or any of its associates; does not guarantee/indicate any returns/and shall not be held liable for any loss, expenses, charges incurred by the recipient. The recipient should consult their legal, tax and financial advisors before investing. The recipient of this information should understand that statements made herein regarding future prospects may not be realized or achieved.
Note: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.