5 things youngsters should remember before investing
Investing from an early-age and keeping note of certain pointers can help you reach your financial goals with ease and also you will be able to offset the inflationary pressure.
As is the need of the hour to continue with our current lifestyle and also for our varied financial goals, everyone needs to start investing earlier. So, here are some important pointers for beginners who have just treaded on their investment journey.
Harnessing the power of compounding
Ramneek Ghotra, Chief Growth Officer, Finvasia said one should be well-equipped and understand about the power of compounding. Compounding means your investment earns returns not just on the initial amount but also on the interest already accrued. Consistent investing and letting your money compound over time emphasize the importance of starting early and sticking with your investment strategy.
Adopt the 50/20/20/10 Budgeting Rule:
The rule works wells for the overall financial planning and emphasises on allocating 50 per cent of the income towards essential expenses like rent, utilities, groceries, and insurance. Then the remaining 20 per cent can be put for your leisure and the balance 20 per cent and 10 per cent should be for investments and emergency fund, respectively.
The 50/20/20/10 rule fosters a balanced approach to financial management, helping you meet current needs, enjoy life, save for future goals, and prepare for emergencies, leading to improved financial stability and peace of mind.
Diversify Your Investments:
Spread your investments across various assets such as stocks, mutual funds, gold bonds, real estate, and indices like Nifty, Nifty 50, and Bank Nifty. Diversification helps balance your portfolio and reduces the risk associated with any single asset class, providing stability against market fluctuations.
Commit to Continuous Learning:
Staying informed empowers you to make well-researched decisions aligned with your risk tolerance. Understanding investment basics, associated fees, and different products is crucial to avoid impulsive decisions driven by hype or emotions.
Think Long-Term:
Remember that investing is a long-term endeavor. Even small investments can grow significantly over time due to compounding. Despite the risks, consistent investing from a young age can greatly amplify your wealth and help you achieve your financial goals by middle age.