As a student or a young adult, it is natural that you will not have good financial and debt management skills. For some of you, it is the first time you are living alone away from home. A few of you might be living in a new city for an internship or job. However, investment is something you should start at an early age to build wealth and establish a secure financial future. In this article, we have shared 7 powerful Investment Tips for Students & Young Adults to help you get started in your financial journey.
There is a common misconception that only working professionals invest however, this is not true. With flexible investment schemes like SIPs, (systematic investment plans) mutual funds even bank FDs, (fixed deposits) you can start early and invest today.
1. Set up a budget
You need to learn how to prepare a monthly budget. It is prudent for them to make a list of daily expenses and other miscellaneous income on receiving their paycheck. The youngsters then have to find ways to curtail their costs. This enables them to save an adequate sum of money which they can invest.
Note, this is not a one- day task. You need to observe your spending habits. Make a list of income and expenditure (including miscellaneous expenses like entertainment, dining out etc.). Draw them up and carefully create a monthly budget you can actually stick to if you are a student. You can also save money by for instance, cooking your own food over eating out. Use this excess money that you save for your investment.
2. Contribute regularly to your investment scheme
Make it a habit of contributing small sums of money into an investment scheme. Over time, they soon find this practice of saving become second nature to them. Moreover, the amounts they deposit into the scheme should accumulate into a large sum of money at the end of the working lives. Through this period, they can earn lucrative returns at varying rates of interest.
For example, an SIP or Systematic Investment Plan or a mutual fund using apps like Groww, Zerodha and PayTm Money.
3. Learn how the investment scheme works
You need to know how a particular investment scheme works to decide whether or not it is worth buying. You should understand what are the financial asset’s potential returns, duration, lock-in period and inherent risks. Moreover, you need to find out if the scheme contains any hidden charges.
For this, they should thorough read the investment scheme’s prospectus, understand clearly its terms and conditions or better still, seek advice from a financial consultant before signing the dotted line.
4. Know your taxes and risks
You need to understand that the returns on all investment schemes are subject to taxation. However, the regulatory authorities charge higher tax rates on certain schemes in comparison to others. You should find out what tax rate is applicable on the investment schemes which interests you. This will give you an idea of your tax liability to expect when receiving these returns on investments.
The same holds true for risks as well. Note, no investment is free from risks, so be prudent and stay informed.
5. Stay informed about inflation
Investors with years of valuable experience often overlook the adverse effects of inflation on their investments. There is an inverse relationship between inflation and real value of the returns on investment schemes. In the times of high inflation, the real value of the returns investors actually earn on their investments falls. Educate yourself financially is one of the most underrated Investment Tips For Students & Young Adults. Try to gain knowledge on the market inflation trends and how it impacts your investments. For this, you would need to check out financial updates and market news online.
6. Diversify the investment portfolio
You obviously will get to know some investment schemes are riskier than others after conducting an extensive market research. However, the schemes falling under the high-risk category generally yield lucrative returns in comparison to others. Keep a suitable mix of high and low risk investment schemes in their portfolio. This enables you to offset the losses incurred on certain schemes with profits returns on the others.
7. Do not make any withdrawals
Do not make any withdrawals from your investment portfolio unless it is an emergency. This ensures your investment fund grows and continues to earn lucrative returns in the future. Otherwise, you will end up losing a lot of money and the goals of building wealth for yourself will be futile.
Investment is not a complicated affair if you are informed and know how your schemes work. In the beginning, you need some advice and guidance. Thanks to YouTube and other credible online resources, you can get all the information you need free of cost. However, if you still are not sure on whether to go in for an investment scheme or not, seek the intervention of a skilled financial advisor to guide you.
We hope the above Investment Tips For Students & Young Adults will definitely help you gain profits and financial independence.