Why Should You Plan For Your Long-Term Investments While In Your 20s?

“The best time to plant a tree was 20 years ago; the second best time is now,” is an often-quoted Chinese proverb. Now, as youth in your twenties, you could not have possibly started investing twenty years ago. Nevertheless, the advice “start early” applies to investments as much as it applies to trees!

In essence, if you have just started earning, the best time for investing is right now. Why? By starting investing early in your career, you gain the definite advantage of time. If you plant a seed today, you will have more time to grow your wealth and reach your financial goals easily.

If you’ve been putting off investing like so many young urban professionals, you are not alone. After all, it is hard to invest confidently when:

1. You haven’t chalked out your investment goals

2. You cannot decide how much to keep aside for investing

3. You feel it is impossible to choose the right investment option, be it mutual funds, stocks, or fixed deposits.

In this blog, we will outline some strategies you can use to overcome these challenges and start building the foundation for your future. Let’s dive in!

Benefits of investing at an early age

Here are some benefits of starting investments at an early age:

1. You will have more time to make your money grow

2. You can learn to manage your money. Knowing the basics of financial planning and budgeting is an important life skill and will help you stay financially secure throughout your life.

3. By investing wisely and building a corpus for your life goals, you will never have to worry about arranging funds. You will be able to avoid dependence on loans and pay off EMIs timely. This way, you will save yourself from the burden of debt.

Methods of investing: How to invest in your 20s

#1 Start investing as soon as you can

Delaying your investments saves valuable time. Set a date when you want to kickstart your investment journey, and stick to it.

#2 Use the EPF scheme to your advantage

Contributing to the Employees Provident Fund (EPF) enables you to start saving for retirement as soon as you start earning. EPF helps you earn a steady interest over time and is a low-risk instrument.  Additionally, any contribution you make towards your EPF is tax-free.

#3 Leverage Rupee cost averaging with SIPs

Investing in a mutual fund scheme through a systematic investment plan (SIP) is an excellent option for long-term investments. SIPs have the benefit of Rupee Cost Averaging. Since you invest the same amount every month, you end up buying more units when the market is down and fewer units when the markets are on an upswing. Over time, this brings down your average cost per unit.

#4 Start small with SIPs

SIPs also allow investors to start small, with many schemes requiring a minimum investment amount of Rs. 500. So, even if you have a beginner’s salary, you can start a SIP. And when you get an increment, you can increase your SIP amount.

#5 Educate yourself about the basics of personal finance

The more you learn about managing your money, the better your finances will be as you advance in life.  Here are the ABCDs of personal finance:

A. Account for savings

B. Budgeting. Understand how much to spend and how much to save.

C. Calculate your taxes

D. Diversify your investments

#6 Set goals

It is important to set realistic goals and plan investments that align with these goals.

If you are in your 20s, start with some basic financial goals:

1. Set up an emergency fund

2. Build wealth over the next 10-15 years

3. Save up for your retirement

4. Short-term goals like vacations, owning a vehicle, etc.

Once you have set your goals, create a roadmap on how to reach them:

1. Decide your investment tenure

2. Decide how much you want to invest over the years

3. Choose your asset classes - equity, debt, gold, etc.

The smart way to start investing in your 20s is here…

Now that you have some insightful tips at hand, do not delay investing any further! To help you, Tata Capital has created Moneyfy, a one stop solution to all things investment.

The Moneyfy app is ideal for investing in your 20s, as it offers the convenience of investing in a range of investment instruments right through your smartphone. Plus, it offers goal-based investment tools like a risk profile assessment questionnaire and an investment calculator.

So, download the Moneyfy app or checkout the Moneyfy Website to kickstart your investment journey, invest with confidence, and enjoy financial freedom for years to come!