If you wonder what the right time to start investing is, you’ll get to hear “in your 20s”. It is true. But if you think you’re too late for it, think again! The 20s is the right age to start investing as you have longer tenure to invest, learn from mistakes and experiment with money. You have a high-risk tolerance too.
But if you don’t know where to start, don’t worry. Today we’ll talk about strategies and tips to help you start your investment journey in your 20s.
Basics of personal finance and investing
The first thing you must focus on is learning. Learn about money management, handling personal finances, investing, saving, and finance rules. You may take the trying and testing route, but things can take a U-turn without proper knowledge. So, you need to invest your time towards learning personal finance basics first. You may also take short online courses or start with free YouTube videos.
• Set financial goals
Setting financial goals for yourself is crucial. If you don’t know your destination, how will you get there? Suppose you wish to retire early, i.e., in your mid-40s. Calculate the amount you need during post-retirement years and start investing accordingly. Or let’s say you have a goal to save Rs.50 lakhs by 38. Now, start calculating how much you’d need to save each month to achieve your goal.
• Start with basics
Before you start setting big goals for yourself, don’t forget to prioritise basic things. These can be:
- Don’t neglect to save enough for retirement
- Get yourself insured (life and health insurance)
- Build an emergency fund with 3-6 months’ worth of expenses
- Start with the 50-30-20 rule. Spend 50% of your income towards needs, 30% towards wants and 20% towards investing.
• Plan your investments
Now that you’ve set your goals and are done with the basics, start planning your investments to reach your goals. The risk involved, past performance, liquidity and market conditions are some factors you must consider while investing. For example, if you wish to save for emergencies, liquid funds might be an excellent option for you. However, since you have long years to remain invested for retirement, equity-oriented MFs can be suitable for you.
• Focus on diversification
Investing all your money in a single investment option/plan is not advisable. It makes you prone to high market risks. You may lose all your money. Hence, diversify! Liquid Funds, Life insurance, Pension plans, Stocks, and Recurring Deposits are some popular options to invest in your 20s. You must refrain from investing money in avenues you don’t understand. These can be cryptocurrency, futures and options or even shares/stocks/IPOs.
• Automate your investments
Investing only works when you are committed to it. You can not expect to see the magic happen if you’re not disciplined. Since the 20s is the time when outings and parties look attractive, automating investments can help build discipline.
• Look for expert assistance
Finance is a diverse field. Learning every aspect of investing is impossible, especially if you are from a different background. Therefore, it is advisable to take the assistance of a financial expert.
Final words
The 20s is the age to make life-long memories while building good or bad habits. If you don’t get serious about money management in your 20s, you may end up struggling with it throughout your life. Always remember that small steps make a huge difference in the long run.
