People often wonder if and when they should start investing. Well, the answer to the “if” part of the question is, obviously! Savings will help, but money saved will not be money earned, thanks to inflation. As for the “when”, if you wait to invest until you’re older, your money could take longer to compound, earning less interest over time. So, rather than sitting on your savings and doing nothing with them, you can start investing sooner, which will give you the opportunity to earn higher returns. So the best time to invest isn’t gone yet, and you do not have to wait till you have a large number of funds to invest. The best time to invest is now.
By beginning your investment journey as early as 20 years old and investing just ₹500 per month, you have more time to let compounding work its magic. You can build your investment profile early and have your account grow for years to come. If you delay the same event by, say, 10 years to begin investing in your 30s, you lose close to ₹41.08 lakh.
Various instruments are available at an investor’s disposal, with mutual funds allowing entry with smaller amounts to invest, debt instruments providing safety in returns, trading allowing high returns, and so much more. An early start at investments also provides the investors with a longer time horizon which increases flexibility and risk appetite. And as the age-old adage goes, risk=rewards. So here’s a little cheat sheet to help you get started on your investment journey.
1. Learn the Basics
The biggest benefit of starting as early as possible is the greater ability to adapt and learn. Thus, irrespective of their field, every person should invest some time in learning about finances and investment. We live in a capital-driven society, after all, so one must learn about the money they earn to best be able to manage it. Finance being the humongous domain that it is, where does one begin? At the beginning, of course!
Investment as a discipline is vast; the instruments available to invest in, the strategies to employ…the list goes on and on. And the only way for an individual to learn all this is to research and educate themselves. With the advent of the Covid-19 pandemic, learning has undergone a significant paradigm shift, and physical classrooms no longer limit students’ access to education. Disciplines like financial literacy are now achievable through virtual classrooms. One such online platform that allows its users to learn about finance easily and at their own convenience is Quest by Finology with its free course, Beginners Guide to Stock Market.
Now don’t let the price tag fool you. Just because the course is free, it does not mean that’s what it’s worth! The course covers the fundamentals in the finance domain such as – financial markets, types of stocks and shares, what are the different kinds of financial products available etc. It also covers the various regulatory bodies that govern the Indian financial markets. The course also dips into the basics of derivatives with futures and options.
“Bluechip Stocks”, a term that investors often come across in their lives, is a bit of a buzzword. Everyone wants to invest in the fabled companies with the tag, but few people know how to find them for themselves. This is where Quest comes in with courses that users can engage in at their own pace and demystify financial terms. One such course that would help you on your investment journey, whether you’re just beginning or a seasoned investor, is the “Modern Methods of Company Valuation”, where you learn to analyse companies on a deeper level before investing in them.
2. Use your Knowledge
Learning about the stock market is not going to be enough if the knowledge acquired is never even used. One of the best ways to truly understand the stock market is to engage with it as an investor.
Most people are either freshers or trainees at their jobs in their early 20s, so the funds that can be invested are not too significant. However, students also have the opportunity to use a greater portion of their income as investment funds, as the obligatory payments (rent, bills, EMIs) are less compared to an older individual. So, be it your stipend or a very meagre salary, invest most of your income in your 20s and use a smaller portion for your wants (parties can wait, the market will not).
While discipline is a very intrinsic quality, it certainly helps to have some help. The process of budgeting and saving one’s finances helps build a healthy habit for the long run.
But how much do you need to save? What expenses should your budget be allocated to? The more, the merrier is a good answer, but Prosperity Ingredients on Recipe by Finology is a free tool that helps gauge the answers to those questions with numbers.
Having collected and prepared your funds adequately, you wouldn’t just want to willy-nilly spend it anywhere, right? This is why Recipe also has a dedicated segment called “Stock Recommendations” on various instruments that would help you invest and achieve your financial goals. These recommendations also come marked with their inherent risk, so you can invest in instruments that match your style.
3. Journey Begins
“Invest and forget” is not a mentality the youth should practice. Instead, once you begin investing, stay invested in the market for the long run. As you grow, so would your income, your investment should follow suit.
Think of the financial market as a “piggy bank for adults”, where taking your money away would break the bank. However, if you keep adding to it and maintain it well, you would be rewarded with more than what you added. Sounds like magic, but that’s the power of compounding.
So if you are done reading this article, go and invest. Remember, the best time to invest is now!