It is said that there is no better time to invest than today. Ideally, your 20s is when you start understanding
savings and investing. This is also usually the age when you start a career, have financial freedom and begin taking
on your life’s responsibilities. One of the advices that you get at this age is to start investing. Here’s why that
might be a good idea:
When you are in your 20s, you have time as a valuable resource needed in investments. It is because the longer you
stay invested; you could have the higher potential to earn good returns. But the question is, how to start
investing? If you are looking to start investing while in your 20s, here are a few things to keep in mind to help
you make an informed decision:
1. Start with the basics of personal finance
Before you jump into investing, you could begin with knowing the basics of personal finance, such as savings,
budgeting, investment products, retirement planning, and tax planning. Having basic information about these areas of
financial planning can help you understand investing better.
2. Investment goals
Consider the objectives you want to achieve by investing before you start. For instance, whether your goals are for
the long-term such as retirement planning, or they are for short-term objectives, like travelling. Then, depending
on the goal, you can choose your type of investment and the investment duration.
3. Know how much to invest
You have to choose how much to save for each objective after deciding what they are. The general investment rule is
50:30:20. It means to allocate 50% of your money to meet your requirements. Your goals and desires can receive 30%
of your income, while savings and investments could receive the remaining 20%. As a result, you must carefully spend
your money toward your financial goals. Then, you can allocate money to the targets based on the investment period.
4. Know where to invest
After identifying your investment goals and how much you can invest, it’s time to consider where to invest.
Selecting the appropriate asset class for your investments can take a lot of work, given the different types of
investment options available to you today. You could add a risk factor to your goals if most of them are long-term.
For instance, you could consider investing in equity schemes if your goals are long-term and debt schemes if your
goals are short-term.
The point in question is how much you would put into equity and how much into debt. A thumb rule says your
percentage of equity investment should be equal to one hundred minus your age. In other words, if you are 25 years
old, your equity investment should be 100 - 25, which indicates that 75% of your money can go into equity and the
remaining 25% into debt.
5. Investment diversification is the key
Each asset class can have its own investment objectives and risk-reward combinations. Hence, diversification in your
investments can help bring a balance in your risks and returns. Also, you could allocate funds across the asset
classes based on your own risk appetite.
6. Keep reviewing and realigning your investments
To stay ahead of the markets once you begin investing, you must periodically analyse and realign your portfolio. For
instance, some assets might no longer meet the criteria for your portfolio, so you could replace them with what fits
your financial needs. At the same time, it is important not to fear market fluctuations or volatility. But with the
proper understanding of what to keep in mind, you can manage your investments without worrying about market
volatility.
To sum up
Investment can easily become overwhelming. Hence, it is important to consider various factors involved in investing
so that you can make an informed choice and begin investing confidently in your 20s.
Disclaimer
An investor education initiative by ICICI Prudential Mutual Fund
Visit www.icicipruamc.com/note to know more about the process to complete a one-time Know Your Customer (KYC)
requirement to invest in Mutual Funds. Investors should only deal with registered Mutual Funds, details of which can
be verified on the SEBI website http://www.sebi.gov.in/intermediaries.html For any
queries, complaints & grievance
redressal, investors may reach out to the AMCs and/or Investor Relations Officers. Additionally, investors may also
lodge complaints on http://scores.gov.in if they are unsatisfied with the
resolutions given by AMCs. SCORES portal
facilitates you to lodge your complaint online with SEBI and subsequently view its status.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
