I have been writing all about Personal Finance and Investment options on this website. I keep tweeting about the same every alternate day. When we talk about personal finance and wealth creation, the most important rule to understand is –
“Start as early as possible & The best time to start investing is TODAY.”
And if you have read any of my articles here on Capitalist Cabin, you know I say this a lot. I started my investing journey when I was 20 years old. Unfortunately, I didn’t research and went behind the herd. As a result, I lost most of my initial capital. But this will not be the case for you. Instead, I will write all about my journey, my learnings, my mistakes, and I’ll tell you everything I know for free.
I only ask you to read my articles, grasp the learning, and promote my website so that I can make some money out of it! (wink)
You can easily do that for me, can’t you? Anyways –
Table of Contents :-
Investment options in your Teens?
‘If you had invested X amount in Y company Z years ago, today you’d have N million dollars.’
We all hear such statements from people, and it is cent per cent true. So why don’t we try it? Because of lack of knowledge!
We don’t feel the motivation, neither do we have any prior knowledge. But if you look at the examples of people who made it big just by investing, you will see one factor common in all of the stories. Time. Each of them devoted ten, twenty, thirty and even fifty-sixty years for their money to compound.
Starting early gives you the advantage to maximise your profits in the long-term horizon. One more advantage of starting early is that you have minimal responsibilities. The less burden you have, the more aggressively you can take risks and grow your money. Worst case – your investment options and strategy could go wrong, and you may end up losing some money. However, since you started early, you’d have enough time and energy to recover the losses.
All in all, this article is for people in their late teens and those in their early twenties. I am going to state the top 5 best investment options for beginners.
Word of caution – I am not a financial expert or advisor. All the ways I mention are my own opinion. Kindly research before investing your money anywhere.
Best Investment Options for a Beginner –
If you read our articles here at Capitalist Cabin, then you must know how big a fan I am of Index Funds. Minimum research, minimum risk, minimum expense ratio & exit load, moderate to high returns. All in one Index Fund. One more great thing about an Index fund is that index funds are more or less the same regardless of which company or association to choose.
For example – Some of India’s most popular Index funds are the UTI Nifty index fund, HDFC index fund, Nippon Nifty Index fund, etc. All these incorporate the same companies. The only difference is per cent allocation.
But hey, why do all the providers have the same companies? Because this is what Index fund is! An index fund is a fund that incorporates all the companies of the country’s index. So your money is invested in each company listed in the index. The only difference is in the proportions according to the fund provider you choose.
One SIP for the long-term, and you can retire a millionaire by investing the bare minimum. As for me, I invest a total of 5K a month in index funds and even if I get 10% interest on my investment options. I can retire a millionaire in 15-20 years from now.
It can be a bit controversial. Mutual fund investing for beginners? You know that ‘Mutual funds are subjects to market risks’, right?
But hear me out, at least. You can invest in mutual funds the way you invest in Index funds. The only difference is –
- You will have to do a bit of research in choosing a mutual fund. More than an Index fund, but definitely much less than individual stocks.
- Mutual funds, while chosen carefully, can give much better results than Index funds. But if chosen carelessly, you may end up getting fewer returns than expected.
However, if you stick to profitable sectors and the most popular mutual fund companies, you will do good in the long term. Mutual funds give you the flexibility to choose between sectors you want. You have the option to choose between individual sectors or even a mix-match. Options are huge and flexible, and so are the returns.
My point here is –
- Even if you are a beginner, all you need is to identify if you want to invest in a single sector or in a mix.
- Once decided, research a bit about the returns your chosen sector has given over the years and its future scope.
- Now, look for the best Mutual Funds houses available and look at their plans in your chosen sector.
- Hit the buy button and start a SIP! Choose the amount according to your feasibility and buy.
The only way to build considerable wealth in Mutual funds is to keep it for the long term. Compounding takes time, but the more time you devote, the more returns it generates.
Wait, don’t curse me yet! I won’t mind even if you do. I mean, who mentions bank deposits and FDs in a list of investment options?
Hear me out. What if you have some short-term goals or plans? You can’t generate considerable wealth in a span of months or even a few years. And you may also have plans to travel somewhere or buy some liability. You need savings. When we talk about savings, there is nothing better than a bank deposit. Let us understand this with an example. Say you want to go to Paris next year. You have twelve months or so, and you need to save money. When you invest the capital in some mutual fund, you may have to pay exit load & expense ratio when you retrieve it within a year. Plus, there is no guarantee that you’ll make any profits.
Now when you deposit the money in some bank, you won’t have to pay a single penny on withdrawal. Plus, a return of 2-3% is fixed. When made a fixed deposit, this number may do to 4-6% returns.
Do you see? In such cases, bank deposits are definitely safer and more convenient.
The word government automatically gives us a sense of security and assurance, doesn’t it? The best thing about investing in a government-led scheme is the security and assured returns. There aren’t many government schemes. Therefore, it becomes fairly easy to choose one.
Most of the government schemes come in with a lock-in period of several years. Now, these lock-in periods vary from scheme to scheme. The variations go on for ten to fifteen years on average.
Now, if you are thinking of some available options, we have one very popular name.
PPF as in Public Provident Funds. I am sure you have heard the word PPF at least once in your life. PPFs are the most popular government schemes to invest in. If you invest in some PPF, you will have to stay invested for the lock-in period. It will easily give you 7-9% returns per year. A few more popular options you can invest in are NSC (National Savings Certificate) & VPF (Voluntary Provident Fund).
A Profitable Skill
Well, this is some philosophy part but hear me out. I will use the simplest words but pay attention to them closely.
I’ll explain it through my own example. When I thought of investing money, I read a lot and learnt a lot. I figured out the options I wanted to invest in. But what would I invest? I am a student, and I don’t have a job. I can invest a thousand bucks somehow, but what if I want to invest more?
I started learning a new skill—the skill to write. I invested money by buying courses and mentorships on how to evolve and earn more. I learnt about writing, digital marketing, building a personal brand and whatnot. It all opened my mind, and I could literally see ways of earning money everywhere.
Today, I run this website, and I post content on my social media to promote myself as a content writer. I do freelance, internships, part-time jobs in writing, and I earn. The more I earn, the more I invest, and it is the key.
The more you will earn, the more you’ll have to invest and the more wealth you are going to build. Get on, and learn some great money-making skills. Work, Earn, Invest, Repeat. That is the key!
I have given you my personal favourite best five investment options if you are a beginner. I haven’t included direct stocks because, in my opinion, you need to know and research fairly more in order to make profits there. However, you are free to do so too.
One thing to remember here is – Start Early. Start as early as possible. Because time span is more important than the sum, you invest.
Start early. Start today. Happy Investing.
Contact me here – @roshan