Money Tips for young investors
If you are someone who has joined his/her first job recently, you are a young investor.
This is the first time, you’d get a salary along with a salary slip and a Form 16 by the end of the financial year.
It is also the time, you taught yourself about investment products. The seeds you sow in your 20s, reap rich dividends later in your life. First learn the concept of compounding of interest.
Thereafter, understand the concept of “opportunity cost of capital”.
When you’re young, your friends , family & relatives will inundate you with wealth management/investment advice.
Listen to this advice but do your own research before committing to any investment product. When I joined my first company at the age of 21 years, I knew nothing about investments.
The first investment I made ,was into a ULIP insurance plan . Since this investment was done on relationship basis, there was no research about the product. A few years later, when I joined an MBA program, I needed the money to pay off my college fees.
Since there was a penalty on premature surrender of the ULIP plan, I ended up losing about 20000.
Obviously, I had not read the terms and conditions before committing my funds!
Losing INR 20,000 was a pittance compared to the invaluable lesson I Iearned so early in my life.
I have seen people making terrible financial mistakes even in their 50s and 60s.
Despite having made investments and lived with the results of those investment decisions, people continue to commit the same mistakes. This seems like a pattern and a reckless disregard for hard-earned money.
- If you are young, read about various investment options available and compare the merits of these products.
- Do not invest because your father suggested so, instead do your own research and then choose the best option.
- Do not trust anybody with your money, the other person may have a vested interest in the product he/she is pitching to you.
- Always ask “What is in it for the other person”? Don’t get too excited , invest time into research before investing money.
- Read personal finance page/column in leading newspapers like Economic Times, Mint, ET wealth and follow personal finance pages of international journals.
- Learn about stock markets and mutual funds.
- The earlier you start developing a knowledge of share markets and equity analysis, the better dividends you can reap.
- If you start investing in stocks/Mutual Funds in your twenties, by the time you’re thirty, your portfolio could have easily trebled in ten years.
- Develop an interest in share /equity research and then invest in shares. Multibagger stocks have the potential to make you a millionaire (Recommended: http://bit.ly/28ZXRk0 )
- Start an SIP in MFs and DIYSIP in shares if you get a hang of shares/equity.
- Always plan for section 80 C. Don’t pay more taxes than you can afford.
- Most youngsters have no idea of section 80 C investments that help save tax.
- Start investing in the month of April of every FY to make the most of 80 C (http://www.oracleinvestor.com/tax/section-80c/ )
- Don’t trust your relatives/friends with your financial planning, take matters into your own hands.
- Start tuning into business channels , slowly you will develop an interest in markets and before long you will be a savvy investor.
- Download apps of mutual fund houses and portfolio tracking apps like moneycontrol
- Don’t trust experts blindly. Remember , even Doctors in hospital chains have targets and ever increasing cases of malpractices in hospitals smack of vested interest. Therefore, always research while zeroing in on any investment product.
Hope these tips help build a significant corpus over the coming years and help avoid committing common financial mistakes .