Why Does It Make Sense To Start Saving or Investing Right Now?

Why Does It Make Sense To Start Saving or Investing Right Now?

The best time to start your investment journey is right now. Yes, now.

You might be convincing yourself that you would begin investing once you have more money.

There is a saying from the book ”THE PSYCHOLOGY OF MONEY” by MORGAN HOUSEL- “Doing well with the money isn’t necessarily about what you know. Its about how you behave. And behaviour is hard to teach, even to smart people.”

Investing while you are young is the perfect way to earn solid returns on your money and you would learn a pattern of financial independence and discipline.

Investing at an early age would teach you the real difference between the investments and savings.

With the rise in inflation our money is already losing its value if it is just kept still in the savings account.

How About Investing for Beginners?

Investing for beginners might look like they need a huge amount of capital to start their investment journey. The little money you invest now will put a more money in your pocket in the future.

The amount of money you invest is totally dependent on the amount of risk you can take at this age.

Every person has their different strategy for investment and savings.

Before entering into the investment journey they must have a good knowledge of where to invest and how to invest, because investment in a wrong asset class can result into losses.

How To Start Your Investment Journey?

·       Setting up financial goal:-

Every person has a goal in their life, so does a financial goal. A financial goal may be like- Buying a house or maybe buying a car for the family or it could be anything. Your financial goals can be short term (i.e.- getting a car)  as well as long term (retirement fund goals).

5 Ways To Set Up Proper Financial Goals:-

1.     Make a specific goal:-  one of the most common reason that people fail in their goal is they set a goal that is too vague. Like- “ I want to be rich” , that doesn’t specify anything nor does it tell about what and how you are going to invest.

2.     Make your goals measurable:- okay so let’s assume that you want to be debt free. It’s a best idea to break down your goal into smaller pieces. Suppose you have a total debt of Rs 2laks. And you plan to first clear the student loan of Rs50k. That’s a goal that you can measure.

3.     Give yourself a deadline:-  People always work with their top efficiency when they have a deadline on top of their head.  So, let’s get back to the example of the student loan. Let’s say you have 10 months time to repay the student loan. So, you can pay Rs 5000 every month for about 10 months.

4.     Make sure they are your own goal:-  We get motivated from people easily. If person A has a financial goal of buying a house that doesn’t mean person B has to have the same goal. He first needs to focus on his top priorities which could be repaying his student loan.

5.     Write your goal down:-  Its been said that if you write your goals then you are more likely to achieve them. So go ahead and write your goal and stick it somewhere you would get your eyes on every moment.

·       Choosing The Mode of Investment:-

   There are a lot of asset classes in the market to invest on.

Every mode of investment has two faces like a coin.

Some has higher risk which will turn into higher returns and some are having lower risk and a lower return.

It’s totally upon the risk-taking capability of the individual.

Now let us discuss some ideas for investments for beginners.

LOW RISK AND LOW RETURN INVESTMENTS: -

                               

1.     High yield savings account:-  These types of savings accounts are different from standard savings accounts as it tends to provide a higher interest rate while still giving customer the regular access to their money. This can be a great place to keep your money that you have been saving for the future.

2.     Fixed deposits: - It is a perfect way of investing for beginners as it is the safest place to invest your money which guarantees you with a fixed interest rate with no risk of the market and it also provides with some income tax deductions. Every bank provides different interest rates so it is very much important for you to research the different interest rates offered by different banks in India.

3.     Certificate of deposits:-  It is a fixed income financial instrument that is governed under the Reserve bank of India (RBI) which is issued in a dematerialised form. The certificate of deposit can be issued by All India Financial institution or scheduled commercial banks. These are been issued at a discount provided on face value. It is also like Fixed deposits as you deposit your money for a fixed period at a fixed interest rate.

4.     Bonds: - A bond is a high security debt instrument which allows the entity to raise funds for their company. It is a type of debt that borrowers avail from individual investors for a specified duration. Organizations including governments, companies and municipalities issues bonds in the primary market. These funds are being used by the companies for its growth and infrastructural developments.

Now comes the real deal!  Now we will be going to discus about

HIGH RISK AND HIGH RETURN INVESTMENTS: -

1.     Equity Market:-  It is a financial market where the shares of the companies are issued through an IPO ( initial public offerings) and traded on a daily basis. It is a very volatile market which can result in huge amount of profit in a small period. This can be a perfect investment for beginners with little money. Here you can invest for long term and you can also go for intraday trades.  

For example if you bought Tesla stock back in 2016, it was trading around $13. But if you see the tesla stock in 2021 it has made a high of around $370. You can clearly see the gain in just 5 years which is around 2800% of return. But don’t get greedy because greed is the ultimate destruction in the stock market.

For example if you have bought AMC stock back in Jan 2021 which was trading around $2 and in the same year within the month of June it has made a hike of around $60. But if you had still hold the AMC stock till 2023 in greed then it would totally be in a loss as it is currently trading at $6 which is nearly no at a situation of no profit and no loss.

 

2.     Mutual Funds:- 

     

 

It is a pool of money managed by the professional fund managers.  The fund managers collect money from the investors who share a common investment objective and invest the same in equity. It is a perfect Investment for beginners with little money as well. You can even invest small amounts like Rs 500 every month for a fixed period of time (SIP). It is totally dependent on the equity market as there is no fixed guarantee of return and it is a volatile market which means you can be rewarded with huge profits and also huge losses too . The fund managers invest your money in different sectors which gives a diversified portfolio to lower the risk.  For investing in mutual fund, you must own a demat account.

 

 Conclusion:-

Investment is important to achieve personal goals. If we don’t invest now the time value of money will decay our money over the time. So by keeping in mind the time value of money ,we analyse different investment modes which suites our criteria and get the desired return and we invest our money in that asset class to accomplish our future goals.

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