SIP Investment, Systematic investment plan

Plan and grow wealth: systematic investment tips for youngsters

If you are in your 20s or in your mid-30s and thinking about investing, look no further. Millennials are no doubt earning a hell lot of money compared to what Generation X and Baby boomers used to earn in their green years. However, when it comes to money management, they are not pro. Owing to their spending habits, millennial don’t save for the long term. A major chunk of earnings is spent on their passion, or for any learning experience. Further, most of the millennials don’t feel that it is important to buy a property or any other kind of similar investment (as of now!). Hence the millennials don’t have a goal, let alone investing for the future.

Why investment is important?

Not having a goal right now doesn’t imply you won’t be having one in future. The problem with this generation is that they are too busy living in their present that they forget to plan for the future or even gives a thought to it. The strength and belief to realize this really is rare, and getting carried away by illusions are easy.

“Beware of everything that is untrue. Stick to the truth and we shall succeed, maybe slowly, but surely – Swami Vivekananda”

Investing won’t only help you in saving and growing your money for the future, but will also help you in managing your money. Hence, you’ll be expanding on your needs and restrict the spending on your desires.

Further, retirement is the common goal among all folks across all age groups. So you can sail through market volatility and save enough for retirement or for any other goal.

Start early save more!

You should start investing as soon as you get your first salary in hand. Saving and investing few thousand bucks continuously won’t be heavy on your pocket, and will generate good returns over the years. So, in future whenever you’ll be needing money, you can simply stop your SIP, sell your units and utilize the funds as per your wish.

The ABCD Of Financial Planning: How to go about investment?

Investment is important, no doubt and the sooner you start it the better it is. But how to go about it? Here are few golden rules you can go through or follow for investing and managing your money:

Set some Investment Goals

In order to start investing, you need to have certain goals, for which you planning to accumulate your wealth. However, if you are among those who have just started earning, then the obvious reply is there are hardly any savings. It is a general perception that this is the age to enjoy and spend most of the amount earned as one can save later, around 35. However, it is advised that one should spend 50% to 75% of the income and invest 20% to 25% of the income.

Once you are sure about how much money you can invest, the next step is to identify some goals. For almost all of us, the main goal is of retirement. There are other goals as well, like higher education, marriage etc. You can list it all out and classify them on the basis of how much time it will take to accomplish it. You can classify them as:

Short term goal: List out goals in this category if it is to be accomplished in 0 to 2 years’ time frame. Goals such as buying a gadget or going for a vacation can be added in this category.

Medium term goal: For those goals, which need at least two years to accomplish and at most five years, list out here. Goals such as down payment of your house or purchase of car can be classified here.

Long Term Goal: Goals such as retirement, funds for business which can wait for at least 5 years’ time frame, and require great amounts, can be classified here.

Look out for appropriate options

Once you have decided that how much funds you are ready to allocate and for what you have to allocate, you should look out for appropriate options that would bridge the gap between your current financial situation and your goals. You have to consider the rate at which your money will multiply and the time frame you have. You can choose debt, equity or hybrid – depending upon your risk profile.

Monitor your Investments

It is of utmost importance that you periodically review your investments. So if there is any mutual fund scheme you wish to stop or withdraw or even transfer your fund to another scheme, you can do so keeping your goals in mind.

Power of compounding is the eighth wonder

Remember learning the concept of Compound Interest in mathematics classes? You might have read just as a subject then, but most people in money market are benefitting out of it.

Let’s assume that four people invest Rs. 15,000 every month at the interest rate of 15% for 15, 20, 25 and 30 years respectively. The total principal and interest accumulated is:

Grouth Table

So basically, the amount earned depends not only on the amount you are investing every month or in lump sum but also the time period and the rate of return you are earning.

Hence by starting investing early, you can build a huge corpus over time!

Buy what you need not what you want

Gadget obsession and the desire to look cool and rich is deep-rooted in this generation, so much so that we are ready to forego our savings. This does not only affects our long term savings but also reduces our net worth. So, instead of spending 50k to 60kbucks on your favourite gadgets, it is recommended that you invest the same amount, and reap the benefits later.

Avoid any liability for short term gains

Credit cards and personal loans look pretty attractive in the short run. The EMI option looks simple and affordable, however, you end paying more than the price of the purchased product. It of no use to purchase an asset whose value degrades over time. It is recommended that one should not go for such loans and avoid excessive use of credit cards.

Go for a financial planner

Financial advisors can come to your rescue if you are having trouble in managing your money. Whether it is accumulating corpus for your retirement, higher education for your kids or marriage, a financial advisor can help you plan and accordingly invest your money. However, make sure that you choose your advisor very carefully. Your financial advisor should have enough industry experience and is qualified enough.

You can reach out to those few individuals who have any one of the following qualifications:

  1. Certified Financial Planner: This chap holds a bachelor’s degree, and has a significant knowledge of financial planning and advisory. Further, he also has at least three years of related experience.
  2. Chartered Financial Analyst: CFA holds a wide range of expertise in financial analysis, securities, portfolio management, investing and banking.
  3. Chartered Financial Consultant: This qualification is similar to that of CFPs, except that ChFC does not have a comprehensive series of tests and also it does not require to abide by code of ethics.

Generally, Certified Financial Planner and Chartered Financial Consultant are approached for advisory and financial planning purpose.

One of the best Certified Financial Planners in Delhi is Mr. Mukesh Gupta. He is a Chartered Accountant as well and has over 23 years’ experience in Wealth Management industry. You can approach him for online investment advisory as well. Visit Wealthcare Securities to know more.

Conclusion

Investing and planning for future is a must, and the sooner you start it, the better it is. Further, in order to take control of your financial health, it is important that you spend on your needs and not wants. You can take help of qualified financial advisor for the same.

Happy investing!

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