A Guide for Young Investors

A Guide for Young Investors

04 Sep 2018

As you approach adulthood and start to give a serious thought to your future, are you ready to be financially responsible for yourself? If you have answered YES, congratulations—you're ahead of the game and deserve a pat on the back! But if you have answered NO, don't worry—there's still plenty of time to set yourself up for success. All it takes is a little effort and a lot of patience to become confident in your financial decisions.

For all new entrants in the investment world, the importance of a gradual and cautious approach that minimizes risks cannot be emphasized enough. A few simple steps, as mentioned below, can act as a good starting point in your savings and investment journey :-

  • Students should enter the capital markets with a thorough learning mindset. They should get first-hand experience by duly experimenting all approaches – futures, options, fundamental investing, and technical analysis and then decide what works for them. College-goers stand a better chance of developing into skilled investors by entering at an early age.
  • Read newsletters by famous investors. Young investors should use equity databases in order to train themselves. An ability to interpret financial statements is a must. Beginners should participate in group discussions and compete against each other using mock money. Educating yourself to invest in stocks is, however, a long term process, and requires a lot of patience.
  • Put the bulk of your portfolio in mutual funds and enter the equity markets in a safe way. Begin with Exchange Traded Funds (ETFs), which give you exposure to a diversified basket of stocks for a small sum. ETFs will give you a taste of market volatility. You can move into actively managed funds once you have educated yourself on how to pick the right equity funds. Only a small portion of your portfolio should go into direct equities initially.
  • Day trading and other short term trading strategies entail high risk. Avoid betting on stocks with money meant for paying immediate or short-term commitments such as your tuition fees. The valuations of mid-cap and small-cap stocks have turned dangerously expensive in recent times, thus avoid overloading your portfolio with them. Do not go for large leveraged bets in the futures and options segment and stay away from the lure of quick profits. Also put your defenses adequately in place.

Mentioned below are a few reasons why your early 20s are the best time for financial planning; here is a look at five of the prominent benefits of investing at a young age:

  • Time is on your side –if you begin investing at a young age, history tells us that you will end up with far more than those who invest later in life. Having time on your side means having a longer time period of being able to save money to invest and a longer time period of being able to scout for investments that can substantially increase in value.
  • Compounding returns –Put more simply, this is the power of the time value of money. Regular investments in an investment portfolio or a retirement account can lead to huge compounding benefits over a longer period of time.
  • Improves spending habits –
  • Ahead of the personal finances game –If you are a young investor, you are putting yourself ahead in the world of personal finance. By growing your investments over time, you will be able to afford things that others can't.
  • Quality of life –By investing early in financial instruments such as Provident Fund Accounts / Retirement Accounts, you should be able to avoid having to make frantic moves near to or during retirement.

So, all you young investors out there, hope you would have derived immense value reading this blog. Wishing you success in your investment journey – INVEST WISELY!

Founded in 2005 by new–age entrepreneur Abhishek Bansal, the Abans Group has evolved into a globally diversified conglomerate, providing expertise in Broking Services, Non-Banking Financial Dealings, Financial Services, Agri-Commodity Services, Warehousing, Realty & Infrastructure, Gold Dore Refinery & Manufacturing, Trading in Metal Products, Pharmaceuticals, Software Development & Wealth Management. The Group is a comprehensive financial and non-financial services and solutions provider, aiming to provide end-to-end solutions to its clients.