This is a partnered post in association with Moneycontrol.
To invest or not to invest is not the question; you must. How and where to invest is the one we need to ponder on. For many millennials, the mere idea of investing can be stress-inducing. Comprehending how the stock market works or understanding mutual funds can be daunting. But to acquire any kind of experience, we need to start somewhere. So, to help beginners to gain investment experience, here are some investment practices to learn from to get started.
Step 1: Divide and Rule
If you earn ₹10,000 a month, decide how much of it you want to save, invest and spend. Divide your income into parts. Before deciding exactly how much of your income you need to invest, look at the next two steps.
Step 2: Set Your Goals
Consider your goals. These could be buying your dream car, owning a house in a few years or travelling to all the places on your bucket list. It could even be a long-term goal of setting aside a certain amount of money for your retirement.
Step 3: Do the Math
To own ₹1 crore at 50, you must start calculating backwards. If you are 30 now, you have 20 years to meet that goal. Take other factors into consideration, too, like the expected annual rate of interest, the money you have already saved, etc. To make life easy, use an online calculator.
Step 4: Find Your Investment Basket
Now you know how much you want to invest. The next important question is – where to invest? In India, there are multiple options. Here’s where you could start:
A study published on the BSE website proves that mutual funds are the most popular avenue for investment among Indian investors. They are a good place to start.
Before dipping your toes in mutual funds, decide whether your risk appetite is high, moderate or low. Then choose between investing in equity, balanced or debt funds, and start a SIP for disciplined investing. You can learn more about the top-ranked mutual funds and invest easily on Freecharge. And you can start investing in mutual funds with as low an investment as Rs 100 and watch your money grow.
Get a Demat account and start investing in shares. Initially, you won’t know the market well so stick to bluechip companies, Nifty ETF and bid on popular IPOs. Avoid following tips from others and refer to trusted sources for market news.
Public Provident Fund
Invest in guaranteed government instruments and get a tax benefit of up to ₹1.5 lacs with PPF. Despite a lock-in period of 15 years, PPF is worth it. You can also get a loan against your PPF account.
RDs and FDs
Term and recurring deposits are another way to invest, but always check the rate of interest. Invest for a shorter period if you feel the rates are low and a longer period if they are higher than normal. There are various financial institutions that offer fixed deposit investment options. Through Freecharge, you can get high interest rates and liquidity to redeem the fixed deposit in case of emergencies, in part or full. Recurring deposits let you save bit by bit for short-term goals. You just have to create one and forget about it.
Investing in the government’s Sovereign Gold Bonds or digital gold is a great way to add diversity to your portfolio at 24k. Gold will hold strong even when the markets are crashing, so check it out and invest on Freecharge.
Insurance and ULIP
Investing in Unit-Linked Insurance Plans (ULIPs) gives you protection plus benefits. You should also get term and health insurance to protect against health-related fees in the future. Term insurance premiums depend upon the entry age: sooner is cheaper. Explore different insurance providers and easily pay your premiums online with Freecharge. You can explore other investment options such as the National Pension System, short-term insurance plans, real estate, etc.
Step 5: The Balancing Act
Keep monitoring your portfolio. Do not have all debt or all equity investments. Balance it out. If you are younger and have a high-risk appetite, you can have 70 percent equity and 30 percent debt, for example.
Step 6: Ask the Experts
You can consult a financial advisor, or research on your own using the internet to learn more about the world of finance and your best investment options.
The millennial population in India is about 40 percent of its total. That’s how many young investors we have with potential to carve the future of the country.
With this starter kit, you will get a headstart on your investment journey and avoid common pitfalls. Find the best investment options on Freecharge – it’s safe, easy and quick.