It is imperative to begin financial planning as early as possible. Youngsters have a greater time to build wealth. Having the right strategy in place while handling finances will help millennials lead a comfortable life in future. Financial planning at an early stage will not only help young individuals maximize their return on investment but also help them attain financial security.
There are numerous investment vehicles available in India. Some of the most popular investment products include fixed deposits (FDs), Initial Public Offering (IPO), Public Provident Fund (PPF), Exchange Traded Funds (ETFs), gold investment, real estate investment, mutual funds, insurance policies, Unit Linked Insurance Plans (ULIPs), and bonds, besides numerous others.
Following eight are the best investment options for young individuals.
Public Provident Fund
One of the safest long-term investment products in India is PPF. The amount invested in a PPF gets locked for a period of 15 years. Youngsters may avail of the benefit of compounded interest received from PPF.
Gold has always been an attractive avenue for both young and old alike. There are numerous formats of investment, such as gold ETFs, gold bars, gold mutual funds, and gold deposit schemes, besides others.
Real estate investment
The real estate market has huge prospects for growth. Investing in real estate is advisable as it offers high appreciation, and may be used to earn rental income as well.
Life insurance policies have become a popular investment mode among millennials these days. Such a policy helps to safeguard the financial interests of the policyholder’s family, in the case of his demise. Some insurance plans provide dual benefits of coverage as well as returns. This amount may be used to achieve long-term goals, such as buying a home or planning retirement.
Initial Public Offering
An IPO refers to a company selling itsstocks to the public. IPOs are an attractive option if it is launched by a financially stable and reputed company. Individuals may, therefore, conduct extensive research before investing in IPOs.
As the name suggests, fixed deposits provide a fixed rate of interest on the amount deposited for a certain period of time. Investors may either deposit in company FDs or bank FDs. FDs are preferred by conservative investors, who do not wish to take any risks.
Post office schemes
One of the most secure investment options in India is post office schemes. Individuals may make a choice from numerous options, such as post office monthly income scheme, post office time deposit, KisanVikasPatra, and National Saving Certificate, besides many others. Such schemes aid in accumulating wealth on a long-term basis.
Equities are listed securities traded in the secondary market. Though such an investment option entails a high risk, it has a great potential to generate huge returns in the long run. Due to this reason, equities are a preferred investment vehicle for the younger generation.
Reasons youngsters should invest in equity
Not investing early enough or being too conservative with investments may have negative impact on returns. Many millennials fear equity market volatility and hence, refrain from investing in equities. Some are not willing to take risks. Some millennials tend to make investment decisions based on their past experiences, instead of their actual ability to take risks.
It is important to note that youngsters have less responsibilities, as compared to those in the higher age group. This allows them to assume higher risks. They may also enjoy high equity returns generated over a period of time.
The aspect of compounding works best for such youngsters, as it gives them more time to build their wealth. For example, a 25-year old individual will have greater time to accumulate a corpus, as compared to a 45-year old person. Investing in share market at a young age of 25 years will allow him to take greater risks, and earn higher returns. In an extreme case where the invested equities fail to perform, he has enough time to recover his losses.
The key to investing in equities is patience. Millennials need to be patient and take advantage of the market. They need to conduct extensive research and invest in stocks of companies that have been performing well, or those which have a potential to perform better. Investing in the right equities will help reap higher returns. The amount may then be utilized to meet retirement goals and other such financial obligations.
Young individuals may,therefore,open a demat account and explore numerous investment options. They must make a choice based on their needs and financial goals. Investing at an early age will help them attain financial stability, and enjoy high returns, thus helping them grow their wealth considerably.