Starting young? Things to keep in mind while investing in your 20s

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September 21, 2021 6:58 PM

Even though it is a known fact that saving and investing from early on can help you in the long run, however, experts say first-time investors need to have a proper understanding before jumping right into it.

Mutual fund, mutual fund investment, Equity Linked Savings Schemes, ELSS, ELSS fund, tax saving funds, Section 80C, Income Tax Act, risk appetite, financial goal, Equity Funds, multi-cap schemesIf the company you are working in provides health insurance benefits, make sure you extend the cover to your parents if possible.

In the 20s most set the foundation of their career – People at this age explore different fields and are busy deciding how to unfold their career, and start earning. Having said that, due to lack of proper knowledge, most at this stage also struggle to manage their finances.

Even though it is a known fact that saving and investing from early on can help you in the long run, however, experts say first-time investors need to have a proper understanding before jumping right into it.

Hena Mehta, Co-Founder and CEO of Basis, says, “In the early 20s, at the start of one’s career, there might not be significant financial obligations and one can probably afford to save a fair amount out of their earnings. Investing money might sound boring in the 20s, but starting young is easily the best way to get ahead.”

One of the main reasons for earning higher returns on your investments is to start early and let the money grow over time. For example, a difference of just a few years in the tenure of your investments could make a huge impact, and the investment amount could double in just 5 years.

That said, it is also essential to enjoy your newfound financial freedom, along with investing the right way.

  • Starting a SIP will help you keep aside a small amount every month based on your comfort and convenience. Make sure you check your risk profile before venturing into mutual funds. Mehta says, “Like all other investment options, mutual funds come with a certain degree of risk. Set up simple goals for yourself, invest systematically and watch your investment grow and compound over time.”
  • Your risk profile changes as your life stages change. Hence, keep in mind different life situations and goals call for different investments. “Starting early gives you the advantage of experience as well. There’s no better way to learn than by doing!” adds Mehta.
  • Along with that, an adequate health insurance plan will take care of hefty medical bills and uninvited medical emergencies. Experts say, health insurance is cost-effective when taken early and therefore, and a sensible choice to make in your 20s. Also, if the company you are working in provides health insurance benefits, make sure you extend the cover to your parents if possible.
  • Providing financial protection to your family often forms the basis and first step of financial planning, experts say. Enter the term plan, and the most basic cover is the one that pays you a lump sum on death. Mehta says, “Opt for the simplest form of the term plan. Your 20s are the right time to buy term insurance as the premium payout is lesser and hence is affordable. It also helps you save tax.”

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