It’s the best of times and the worst of times to be a Gen-Z investor in India. Digital platforms have enabled every young investor to start investing with even small sums but a plethora of options can trap you into the wrong investments. The following steps can set you up for financial success:
1) First Save And Invest: Investing what is left after expenses is a sure shot way to end up with zero savings. Try to save 15-30 per cent of your monthly income. If it is tough to save that much, you can start with even `500 a month. Start by automating and committing to a systematic investment plan (SIP) in mutual funds. This helps build your core portfolio through a well-regulated product. www.mutualfundssahihai.com, a website launched by the Association of Mutual Funds in India, and other platforms can help you learn more about mutual funds.
Fear of missing out (FOMO) and peer pressure can induce many to start investing in shares directly on the basis of tips or buying into options such as cryptocurrencies without having a proper foundation. Such asset classes come with high risk and you could face heavy losses. If you must invest, then limit it to a small 5-10 per cent of your investible amount as a way to explore.
2) Avoid Borrowed Joy: Stay away from loans, buy-now-pay-later (BNPL) schemes and credit cards, as these can turn into a debt trap if repayments are not done on time. The interest rates can be high and any unpaid dues can soon balloon into a much larger amount.
3) Take Insurance Only For The Right Reasons: Avoid getting pushed into investments through the way of traditional life insurance plans that get mis-sold under the guise of investment plans. Take life insurance through low-cost term insurance only if you have dependants. Check if you and your parents have adequate medical insurance and if they are dependant on your income.
4) Become Aware Of Product Charges: Choose an investment service provider who has good after-sales support and infrastructure and not just lowest cost. For example, if you exit a fixed deposit prematurely, you will lose out on interest.
5) Stick to your plan: After deciding on a planned investment allocation, stick to your plan through market ups and downs, provided the fundamentals of your investments remain strong. Rushed exits can convert temporary falls into permanent losses for your portfolio.
Regular investment habits can create a corpus that enables you to enjoy early levels of financial freedom.
The author is Co-founder, Scripbox