Investment Tips for Young Professionals

India is seeing a new dawn with more youngsters being placed directly by way of campus- selections and getting high payments in their first jobs. When people first start earning, they do not know how to invest and how much to save. But gradually the tax deductions are eye openers for them and they take to savings at an early age. Initially it may look difficult to save more but, the habit of investment and savings at an early age would allow you mastering the skills to budget and invest in less time and will help prevent future liabilities and debts.

You should keep in mind the following :

Tax Angle : In India, the tax payers are well educated about the investments and savings as they want to save the taxes no matter whether they are self employed or salaried. But you should also remember that beyond a point, investments may not help you with saving taxes anymore. Public and Employee Provident Funds are tax exempt to a limit and offers interest compounded annually at roughly 8 percent. So does the NSC and a few other options available. It is wise to have a balanced portfolio and one that meets all your objectives.

Ability to take Risks: You should properly allocate your resources towards first things first. And also keep an eye over what kind of investments you want to go in with. There are multiple options available but the investment needs differs from person to person on the basis of the family and surroundings s/he comes from. So everything should be kept in mind.

Phases of life and alternative income resources :  You should also be prepared for the inevitable changing phases of your life. Nowadays people plan their life well in advance whether it is getting married, child births, family responsibilities and other such things. Also sometimes the most unexpected happen like layoffs and circumstantial health and physical challenges, in such cases even the investments made into mutual funds with high lock in periods and low initial returns might not serve the purpose well. So to cope up with such situation one should be ready with the alternative funds so that the long term investments remain least affected.

The steps that will help you to invest in stocks better :

Set Goals : List out the short term and long term financial goals, it has to be set according to your norms like how much would you like to spend for expenses in the near future like your wedding or your first car or gifts to your parents and family, India being a more emotionally run economy the expenditures seem to be higher in the initial days. It may seem pointless to prepare a list of long term goals with a career that is just taking off. But the list will give you perspective of how you would like things to shape up. Some of your long term goals can be buying a home, retirement and emergency fund. Setting such goals will help allocate your money accordingly.

Create a model Portfolio : Investing can be a fun and profitable experience even during the highly volatile markets all you need to do is keep an eye. As an exercise, create a model portfolio and pick the scripts, funds and debts based on your knowledge of the instruments, the market and yourself. There are websites to help you mock trade. Try to stick to your goal plan and navigate through trends. The virtual payoff you make by charting earnings will help you attune yourself.

Calculate the Risk You Can Take : This is a vital element of investment; young people have different risk tolerances mostly higher than the older investors. Individual investors have different degrees of risk taking ability. There are many ways that will help you determine your portfolio online quizzes and questionnaires are majorly used to ascertain the risk taking abilities. So you must calculate your assets and the risk you can bear. Knowing the limits of risk you are ready to take and communicating that clearly to your financial and wealth advisor will help you along the way.

Calculate Your Possible Sources of Income : Most of the Indians always have multiple sources from where they can earn apart from the salaries, usually it is in the case of HUF. You should start by gathering information of all your possible sources of income in the near future and your ability to liquidate or use the funds. Estimate the expenses you will incur to live the standard of life you choose and also keep a sum of money aside for an emergency fund. The remainder will be your investible income. It is always advisable to make an inventory of your current debt and the terms of your loans an liabilities, what your current taxes are and how much you would like to shear off.

Search information : Since it is your hard earned money, you should be alert and watchful, a technical and synchronized know how will always be helpful as it will prepare you in your journey to become a star investor. Have as much information as possible about the subject and have it written down in an organized manner. Ensure that you trade through registered and financially sound companies. Keep a safe distance from the shallow people. Be cautious of opportunities from friends and relatives who might not be well versed and might not have a complete knowledge about the pros and cons.

Take Help from Advisors and Experts : Whenever there is a confusion consult the expert, some of your decisions may look like a perfect decision based on a well- researched evaluation of business performance or at times it could be an intuition paying off well but in the long run, risk taking should be guided by a specialist who has spent a long time in the business to know you better than you know yourself. A guide to help you suppress wild investing decisions can also help you swallow the advisor’s flair in stock selection, many a times it’s the advisor’s own hidden agenda and favoritism which might go wayward in time so an expert’s guidance should be sought periodically.

Assured High Returns, Promises, Really? Be wary. : Investing in the stock market is subjected to market risks, it is as good as a gamble which is able to richly reward one and bankrupt another. Neither of them gets any wiser about the mechanics of it all, if not carefully watched this may result in huge losses. Although the stock market is slightly more predictable and follows many economic rules and is controlled by a regulatory body (SEBI). It is always advisable to refrain from the products with high returns as they involve higher risk, which can mean losses that can be high as well. Check for past records, and take advice from mature investors who have seen it all.

Track Your Portfolio Regularly : By observing trends and changes in the market, you can very well know when it’s time to get out. Don’t fall into the smugness. As this might make your portfolio appear to be saturated. Also keep a close watch on the portfolio you have created periodically to ensure if it is really serving your goals and adjust accordingly. The exits and entries in new scripts should also be well researched when you are opting out to migrate.

Avoid blind dates with newbie : It is often observed that the new products are promoted as highly promising and buffed up in a way that they look lucrative by all means. You should be vigilant and careful with such, low allocation to highly appealing products might be advisable so that the funds are controlled wisely.

Get involved only when you understand fully : There are people who invest, earn and continue to. And there are people who keep taking risks in spite of losing just because there are vague promises. Spend time analyzing the various parameters by yourself. If the details are sketchy or not fully disclosed, don’t bother. Besides, the opportunities for learning from mistakes are lost when you don’t know what you did right or where did you go wrong. The clumsy investors often end up losing the entire life’s savings so refrain if it is beyond your understanding.

It may initially look difficult with the high impulse towards purchases and a good life style to show off, often in accordance to the brand you are associated with and keep aside money for what you want the most. But a good portfolio building is possible as there are lesser responsibilities and a greater penchant for risk at a young age

Happy Investing!

Leave a Reply