How to start investing?
The first pay may not be a fat one but at the same time you must also remember that you are not shouldered with too many responsibilities and the initial few years of planning and investing can reward you exponentially in the long-term. Hence, no matter how small your first paycheck is, you need to start saving and investing from the beginning. Firstly, how you spend your salary in the first few months of your career will determine your saving and investment pattern for the rest of your career. Secondly, the power of compounding works wonders on investments.
Quick Financial Tips for Career Starters:
Here are few tips to strategise your investments from the start of your career, which can make you richer by a few crore rupees by the time you retire:
- Set clear Financial Goals:It is extremely important that you define your goals clearly so as to provide direction to your planning and the time horizon to achieve the same. Setting up goals and the time frame to achieve them help in better asset allocation. For long-term goals you can look at investing in equity as these investments fetch higher returns.Also, pen down your goals. Put figures and timelines against the same. It just helps in achieving them!
- Align your Investments with your goals:Once you have managed to make your monthly budget and set aside the amount you want to invest every month it is very important that you align these investments as per your individual goals. You must remember to avoid investing blindly in products, in which your friends and colleagues have invested, as their objective of investment may be different from yours.For example, if you have an education loan which you have to pay off you should compare the interest rate of your loan against the return on your investment and accordingly choose between paying off the debt or investing the surplus.Research says that once you start your investments according to a planned goal, chances of continuing it long term is much higher!
- Buy a term plan:Buying an insurance policy is the first step for a sound investment planning. The other advantage of buying an insurance policy in the beginning of your career is that you can get a higher cover for a lower monthly premium as age is one of the critical factors which determines the premium of your policy. Hence a good term plan with adequate coverage is best when bought early in life.
- Invest in Good Mutual Fund Schemes via SIP: One of the best ways to start investing is through the systematic investment or SIP mode in Mutual Funds. Mutual Funds provide the ideal investment platform to invest in stocks which an individual cannot buy directly due to limited resources. The advantage of investing through SIP mode is that it helps average out the cost of purchase and one does not need to shell out a lump sum amount at one go.
- Check the Tax Efficiency before investing:It is a common practice amongst most of the salaried employees, let alone beginners to do their tax planning only after they get a call from the HR department. However, if you plan your investments well in advance you can reduce your tax liability considerably and also earn good returns from such investments without making hasty decisions.If you sincerely invest your Rs 1.5 lakhs of 80C corpus over the long term, your investment corpus will soon look healthy and also provide you with tax efficiency!
Time is a very crucial factor which determines the return on your investments. If you start investing early in your career not only would it help you build a huge corpus at retirement but also help in bringing about discipline in your spending habits as you will have lesser money at your disposal.
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