According to Facebook Insight 49% of the people who visits this site are between 25 to 34 years. So we thought of writing Investment Strategies for young people & here it is. You may be unmarried or recently married or may be on the verge of starting a family. You might be new to professional life or settling in your career. Also you may or may not have bought a house. If you are in these parameters go on to read….
At the seed stage of life if you inculcate the right strategy in handling finances, you will lead a very comfortable life. You should list down their financial goals and make a financial plan. Construction of a house without a blue print is dangerous; so one must plan before you really act. One can take help of professional Financial Planners to give them a right direction. Make sure that all financial products should be taken on NEED based analysis and one should clearly avoid products that offer mixture of needs life investment with insurance etc. We have tried to provide a road map on financial management but they are generic in their approach. The actual decision should be based on their situation.
Insurance for young people
You should opt for Term Insurance only, for at least 15 times of your annual income. For example, if the income is 5 lacs a year, the sum assured should be Rs.75 lacs. Term insurance for such amount may cost around Rs. 10-12000/- depending upon his age, health and habits. He should avoid any other kind of Life Insurance or Unit linked insurance plan. If there are no depended no need of term plan also. Accidental and Mediclaim Policy if not provided by employer should be taken separately.
One should look for property investment only if one is going to stay in such house for at least next 10 years. There is really no hurry to take immediate decision.
The person at such age at times live on credit and by the end of the month, many of them are short of cash. One should start putting some amount in Short Term Funds to create an Emergency corpus of at least 6 months expenses. Avoid 100% reliance on credit cards. Develop habit of using cash or debit cards. In movie Shuarya, K K Menon says “agar jindagi udhar pe chal rahi hoti hai to sachai door ho jati hai”. So reality check is very important.
You should open a PPF (Public Provident Fund) account as soon as you get into job even if you are investing through EPF (Employee Provident Fund). We are not suggesting young investors that they should put the maximum amount permissible which is Rs.70000. But one should open the PPF account and just put little bit so that at least the account completes its lock-in period as soon as possible.
Start Saving for Retirement
You should not think that he/she is too young to start thinking of retirement (after all we are not Rajnikanth who can defy age and health problems). We just want to say that even a very small contribution towards retirement corpus at this stage would become a huge amount at the time of retirement as you have the POWER OF TIME in hand. At later stage, time cannot be compensated by investment huge amount also. SIPs in Diversified Equity Funds are the best option for such planning.
Loans for young people
Loans like Education Loan or Home loan are good but in case one takes loan for buying expensive Car or exotic holidays that is a wrong approach. Also use of credit card should only be to substitute handling of cash and ease of payment and strictly it should not be used as tool to get loan.
1. Investment Linked Insurance (ULIP)
2. Spending on WANTS/DESIRES rather than only needs
3. Investing in Liabilities and not Assets
4. Making Portfolio similar to your parents
5. Not giving importance to financial literacy
Feel free to add your views on above mentioned points.