Age of 25 is generally the age when most of the young adults have already stepped into their career, and experts consider it as the right time to start knowing about investments too. Here are the ten basic things about investing that people should know in their mid-twenties.
Savings is not wealth creation:
It is important to know that savings in your bank account is hardly fetching any returns and therefore, does not make a meaningful contribution in wealth creation.
Any investment will make sense only if it can generate returns over an above inflation rate. So, its better to choose equities over fixed deposits at the earliest to reap benefits.
Risk is inevitable:
Every investment has a degree of risk attached to it, which could come in the form of loss of capital or decreasing purchasing power of your money. But, in any of the case, it should not deter one from investing.
A diversification calls for dividing one's investible surplus in a basket of different assets like equity, bonds, commodities, forex, etc. An investor should always aim to attain a balance in his diversification to attain financial goals.
Rate of interest:
Performance of different investments could be evaluated through Rate of Interest (ROI) method where investment gains are divided by costs.
A young investor could always take the mutual fund route to overcome diversification issues. A mutual fund invests in multiple securities in line with its investment objective, thus, saving time and energy for investors to go through personalized stock picking.
There are a number of investment products that offer tax benefits along with returns. Thus, an individual with taxable income could always hit the two goals of investing and tax saving through these instruments.
Failure is natural:
There could be times when your investments do not perform or underperform, but it is not a unique event and almost all investors taste failure at some point of time.
Starting investments early is one of the basic rules of a successful wealth creation.
Not everyone holds expertise in financial markets and thus, in case of doubt, reach out to a reliable financial planner or wealth advisor to help you with your goals.