Investment options you should consider while you are young

If you start investing at the age of 25 and plan to retire at 60, you have 35 years to plan, save, and accumulate wealth. On the contrary, if you start investing at 40, you will have only 20 years left. This pushes the burden of financial stress to a later stage in your life.

Evidently, the sooner you start investing, the better it can be for your financial security. There are multiple investment options in India, such as mutual funds, Exchange-Traded Funds (ETFs), stocks and bonds, etc., for youngsters. However, before you go ahead and pick one, it is important to understand how these investment options work.

Here are some of the best investment options for young investors.

1. Short-Term Bond Funds
 

These are a type of mutual funds that invest in short-term bonds or debt instruments such as commercial papers, certificates of deposit, government securities, etc. They have a maturity of up to three years. They offer low-risk and tax-adjusted returns. Moreover, they are highly liquid and can be used as an emergency fund in the case of a financial emergency. 

2. National Pension Scheme (NPS) 
 

NPS is a retirement scheme backed by the Government of India and governed by the Pension Fund Regulatory and Development Authority (PFRDA). It is one of the voluntary retirement accounts in the country that can be used by the private, public, and unorganised sectors (barring the defence forces). NPS is a great investment option that offers tax benefits and annualised returns, usually ranging between 8% and 11%.

3. Individual Direct Stocks
 

 Stocks, also known as equity and shares, represent ownership of a company. Publicly listed companies have stocks that can be traded on stock exchanges. As an investor, you can buy and sell these shares at a profit. Trading in stocks can involve high risk. However, proper research on the company and sector can help you make sound decisions.

4. Exchange-Traded Funds (ETFs)
  

ETFs are a basket of stocks traded on the stock exchanges, just like stocks. Similar to index mutual funds, ETFs track an index like the CNX Nifty or BSE Sensex and mimic their performance. There are different types of ETFs, such as gold, bank, international, liquid, etc. 

5. Mutual Funds 
 

Another excellent investment option, mutual fund schemes take money from multiple investors and invest it in the market. Every mutual fund has an objective according to which the fund manager may buy and sell securities. Mutual funds are one of the best options as a strategic investment. 

There are several types of mutual funds, such as equity, debt, balanced mutual funds, etc. Some mutual funds, like the equity-linked savings scheme (ELSS), also offer tax benefits. For instance, youYou can invest into ELSS schemes from can consider the link IDFC FIRST Bank – MF Investment Tax Advantage ELSS Fund., ​​ which ELSS offers tax savings under Section 80C and lets you claim a tax deduction of up to Rs 1.5 lakh per annum.

Conclusion

Picking the right investment option is critical for young investors as it can set the course for financial security in their life. This can be done by evaluating one’s needs and goals and investing in options based on one’s risk appetite and budget. Additionally, young investors can also use a high-yield savings account to save and earn passive income through interest.

Disclaimer

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