It is only in the last few years that people in India have started understanding the importance of investing. As a result, we don’t have a lot of family members who invested religiously. Unfortunately, “Investing for Young Adults” isn’t generally part of our school curriculum.
So, once we start earning, we’re mostly on our own to navigate the complicated world of investing. But investing doesn’t need to be that complex.
If you’re a young adult who has recently started earning, then here are some handy tips that can help you lay the groundwork for a long and profitable investment journey-
- Set Specific Investment Objectives
A journey with no destination is no journey at all. Therefore, before you set sail on this lifelong expedition, it is essential to set specific goals. For instance, purchasing a house is not a very specific goal. A better objective would be purchasing a 2BHK in Mumbai worth ₹1 crore before you turn 35.
Specific objectives play two critical roles- first, they provide you with an investment horizon that will determine your risk appetite, and second, they’ll help you calculate the amount you should save and invest each month.
- Focus on Diversification
Diversification is key to long-term wealth creation. By diversifying, you spread the risk across multiple markets and asset types. So, even if one or two of your investments are underperforming, it’ll not significantly impact your overall portfolio.
You can build a portfolio of stocks, mutual funds, gold, tax-saving fixed deposits, and REITs. As you’re young and have more time to remain invested, you can focus on building a more aggressive portfolio inclined towards high-risk assets such as equity.
- Understand Taxation
Nothing is certain except death and taxes. While we cannot do anything about the inescapable, we sure can reduce our tax burden. The tax laws in the country have several provisions that can cut down the tax obligations, whether you’re a salaried employee, self-employed, or independent professional.
Try to learn the basics of tax laws in the country to take maximum advantage of such provisions. Even while comparing investment options, lay a major emphasis on the associated tax obligations to make tax-efficient choices.
- Add Insurance to Your Portfolio
It is only a matter of time before you get married and start a family. Thus, it only makes sense to add insurance products such as health and life insurance to your portfolio when you’re still young.
You can also consider family floater health plans that allow you to add your parents, spouse, and kids to the same plan. If you want to purchase life insurance, then you have investment plans like endowment plans and ULIPs that combine life insurance with disciplined savings and investments.
Click here to know about Kotak ULIP Plan.
- Always Stay in Control of Your Emotions
Market-linked assets such as equity are volatile. If your stock portfolio is suffering rapid losses, then you might be tempted to exit your positions to prevent further losses. But selling stocks or adjusting your portfolio every time the market moves 5%-10% is not a smart strategy.
Not just stocks; no matter where you invest, the decisions should always be based on solid research and data, not your emotions. If you’re finding it difficult to build or manage your investment portfolio, then you always have the option to consult an investment advisor.
Navigating the World of Investing as a Young Adult
Starting your investment journey when you’re young will give you more time to achieve your long-term financial objectives. It’ll ensure that your money has more time to compound and grow. While the world of investing might seem intimidating at first, your mastery of the basics can take you a long way.
Be consistent with your learning and consider investment plans such as ULIPs and endowment plans to build a long-term portfolio that takes you closer to your objectives.
Read more to know about Savings Plan: https://www.kotaklife.com/online-plans/savings-plan