How to invest in your 20's | Financial Planning for Beginners | ETMONEY

Deciding on how to invest money in your 20s can seem a bit formidable at first, with many people offering different and very isolated opinions. It’s happened to many of us and so, in this video, we have compiled some essential investing strategies that anyone and everyone in their 20s should apply. And if you have crossed your 20s, then too, the contents of this video will serve as a good checklist and a timely refresher to you

Chapters:
00:00 Introduction
00:52 Just Start
02:17 Educate Yourself
03:25 Set Goals and Invest in a Plan
05:58 Save and Then Spend
07:25 Lean on Equities
09:50 Automate It
11:58 Take Advantage of Free Money

👉 JUST START

Most people in their 20s approach investing by delaying it under the pretext that they have time on their side. But it actually this procrastination that makes all the difference between achieving all your financial goals with relative ease versus maybe achieving it with much hardship

To remove any resistance to investing, start out by : 1. Enroll in the EPF or the employee provident fund scheme through your organization and 2. Start a mutual fund SIP

👉 EDUCATE YOURSELF

One of the flaws of our education system is that it does not cover subjects like money, investing and personal finance. This means, it is left to you to make time and take the effort to learn essential financial skills

While there is a lot to learn, but if you are in your 20s and you are just getting started, get the ball rolling by learning about:
1. Budgeting
2. saving
3. Investment products
4. Financial metrics and
5. Taxes

👉 SET GOALS AND INVEST WITH A PLAN

If you haven’t started creating your goals, we recommend you start off with three basic financial goals for yourself
1. Setup an emergency fund (3 to 6 months of expenses)
2. A wealth goal (like, 1 crore by the age of 30)
3. A retirement goal (like 10 crores by the age of 60)

Ofcourse, these are some basic goals and one can add more like owning a house, annual vacations, daughter’s education etc.

Post that, focus on three main considerations that’ll help you reach each of the goals:
1. The timing i.e. when to do what and for how long
2. The investment i.e. how much money goes where
3. The instrument i.e. whether to use debt, use equity or use any other asset class

👉 SAVE AND THEN SPEND

Encouraging yourself to first keep aside some money towards your future financial goals and post that, use the rest of your savings towards your expenses. This way you not only ensure that you are moving towards your financial goals, but you are also challenging yourself to make small but manageable changes in your everyday expenses without massively altering your lifestyle

👉 LEAN ON EQUITIES

Longer term goals like buying a house, child’s education, retirement etc. need a lot of money which can even run into a few crores. The ideal asset strategy for long-term investments is to allocate a higher proportion of it to equities

Infact a thumb rule which works perfectly in the 20s is the “100 minus age” rule. Per this rule, the difference of 100 and your age is ideally the percentage of equity you need to have in your portfolio

It is also advisable for young investors not to put their money in anything that they don’t understand. This includes cryptocurrencies, futures, options and even stocks, if you don’t understand how these are priced and valued

👉 AUTOMATE IT

The most effective way of automating your investments is by setting up a systematic investment plan or SIP. Quite simply, an SIP is a system which effects the purchase of units in a mutual fund scheme of your choice for a particular amount and on a particular date every month

ETMONEY SIP Calculator Link:
https://www.etmoney.com/tools-and-calculators/sip-calculator

👉 TAKE ADVANTAGE OF FREE MONEY

If you are a salaried person, then the EPF or employee provident fund scheme is a wonderful way to divert some part of your compensation to this retirement account. This way money keeps getting accumulated and you earn interest on an annual basis

Now, the really cool part of this program is that the money that is extracted from your compensation as the employee’s contribution is matched with an equal amount by your employer which practically means half of the money contributed in your name comes free to you

Video on EPF: https://www.youtube.com/watch?v=lBagn--KERk

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