Let’s accept this, “Adulthood is fun” said no adult ever. All your childhood you wanted to grow up to become an adult and when you finally do, it is like someone locked you up in a dark room- completely clueless and all alone. Being by yourself is not sad but nobody ever told us about this harsh truth, everyone has to learn it the hard way. Few of these things suddenly become very important and you are expected to deal with it like, getting a job, managing your own lifestyle, paying your bills, paying for your own trips/commute, and SAVING! I mentioned saving in bold because no matter how much you earn, it is always difficult to save, and mind you it is not like having a piggy bank back in your childhood, it is a whole different level of this game called LIFE!
Warren Buffet, the famous investor who is also on the list of top 10 richest people in the world has repeatedly said one thing in almost all his interviews, “Start saving when you’re young”. He strongly believed that if you do so then in the next 20 years you will be a millionaire. Now that is interesting, right? We all want to make money to afford that dream car, our own house, and fancy vacations but we also don’t want to waste all our lives behind that desk, every day 9 to 5. So, here’s a solution, start INVESTING! I’m sure those who are unfamiliar with this can see numbers in green and red appearing on the TV screen with some random names scrolling below with an arrow pointing upwards or downwards. Yes, it can be scary but honestly, once you learn about it and get even the basic understanding of it then you will actually start liking it, especially when you see your money getting double (not always but surely there is some upside!).
There are different types of investment options and we will discuss them all so that we form a basic knowledge of it before we make the decision of actually investing. This might be helpful for those who are new to this and wish to learn right from the beginners’ level. So, let’s get started!
You might want to keep this little tip in mind before you invest-
- Returns on Investment (RoI) greater than or equal to the principal amount (this way you won’t lose anything)
- Do background research before making any investment plans so that there is little or no risk
- A high return- low-risk investment products do not exist, it is an ideal scenario that is not seen at present at least
There are two categories under which the different best investment buys in the sale products fall under- Financial assets and Non-financial assets. Financial products are further divided into market-linked products and fixed income products. The following diagram will help you understand it better.
Market- linked products: Stocks and Mutual funds
Fixed income products: Public Provident Fund (PPF) and bank Fixed Deposits (FD)
Physical products: Gold and Real Estate
Treat them as baskets where you are going to put your money depending upon the level of risk and the rate of returns. Risk and return go hand-in-hand so you also need to remember that the greater the returns expected, greater the risk involves for it.
- Direct Equity: This is a highly volatile product and one needs to have good market knowledge, in the sense, the knowledge and instincts to read the market. It is also the most rewarding product, one can have the highest returns compared to other products but again there is way too much risk involved. But, there is another option available- the “stop-loss method”, where one can put an order in advance to sell their stock for a given price, this way there is will be less risk. One needs to open a Demat account in order to invest in equity. You can refer to the following link to know more about equity-How to buy and sell stocks on your own
- Equity Mutual Funds: We all have seen television advertisements about Mutual funds, it is the best investment buys in the sale of equity stocks. It can be managed actively or passively, if managed actively the person should hold good abilities for higher returns. To know more you can refer to the following link- Equity Mutual Funds
- Debt Mutual Funds: Those of you who wish to stay on the safer side and expect stable returns can opt for this option. These are fixed income-generating securities like government securities, corporate bonds, treasury bills, and other money market instruments. Though it is not a zero-risk investment option, the risk it carries is that of credit and interest rate. Learn more about Debt Mutual Funds
- Public Provident Fund (PPF): It is the safest option and those who do not expect short-term returns find this as a secure alternative. It has a fixed period of 15 years, and the government keeps reviewing the interest rates quarterly. The compounding of tax-free interest is huge and a good investment decision especially for later years. Learn more about PPF
- Bank Fixed Deposits: Different banks have their own interest rates decided as per their banking norms. These are usually at the lower rate of interest compared to mutual funds and equity but at the cost of lower risks. The account holder can decide the period for the interest option and later this interest is added to your total income and taxed as per the eligible income slab. Read more about Bank Fixed Deposits here
- Real Estate: Honestly, it is not everyone’s cup of tea. The real estate market is highly unpredictable. The ground rule of real estate investment is that it is all about the location of the property. The location will decide the capital value and the rental value of the property. But remember the house you live in should NEVER in not for investment, if you own a second house then you can use it for the best investment buys in the sale purposes. There is a lot more about illiquidity, property, etc. click here to know everything about Real Estate investment.
- Gold: These are the old ways of having a safety net during a crisis. Before there were banks, people used to buy gold in the form of jewelry, coins, etc. not just for pleasure but as security as well. These provide the quickest means of getting liquid cash which is not the case with real estate. One might struggle to sell a house/ put it as a rental when you need money in a crisis, but you can always liquidate gold (you might not get the best price at that time but you will get some financial security). Many buy gold as a serious investment option but mostly it is for the safety net. Also, nowadays you need not own actual gold but buy sovereign gold bonds (paper- gold). Learn more about Sovereign Gold bonds
In the end, it all about market research and how much you have saved to invest. Word of advice, never invest all your savings and never invest in one product type. Diversify so that the risk is shared and there are some fixed returns to keep generating for yourself. The youth needs to understand the difference between “YOLO” and living in the present, the former might seem a bit careless whereas the latter one is more care-free. Enjoy your present, pamper yourself because you deserve every penny of your hard work but be responsible about your future as well. I hope you find this helpful and would start making the best investment buys in the sale choice at the earliest