As a beginner or a youngster who has just started earning, it is important to invest your money wisely to help grow your wealth over time. The best investment plans available to young investors are bewildering.
In addition to thousands of products and services to choose from, there are many firms and vendors that market them in various ways. However, it is not as difficult as you might think to put your money to work.
Importance of Investing
However, before we start investing, it is important for us to understand the importance of investing. Investing is one of the most important financial decisions that youngsters can make.
It is the key to building long-term wealth and achieving financial independence. Here are some reasons why investing is important for youngsters:
1. Compounding: Investing early allows youngsters to take advantage of compounding. Compounding is the process by which the interest earned on an investment is reinvested, resulting in a snowball effect that can significantly increase the investment’s value over time.
The earlier you start investing, the more time your investments have to compound and grow.
2. Inflation: Inflation is the rate at which the general price level of goods and services in an economy increases over time. Inflation can erode the value of money over time, making it important to invest in assets that can keep pace with inflation.
Investing in stocks, real estate, and other assets that have historically outpaced inflation can help youngsters maintain the purchasing power of their money.
3. Long-term goals: Youngsters have the advantage of time on their side when it comes to investing. By investing early and regularly, they can build a significant nest egg over time to fund their long-term goals, such as buying a house, starting a business, or retiring comfortably.
4. Risk-taking ability: Youngsters typically have a higher risk-taking ability than older investors, as they have a longer time horizon to recover from any losses. This makes it a good time for them to invest in higher-risk, higher-reward assets such as stocks and mutual funds.
5. Financial literacy: Investing provides youngsters with an opportunity to learn about personal finance and investment strategies. By starting early, youngsters can develop good financial habits and learn from their mistakes, setting them up for a lifetime of financial success.
Best Investment Plans
Investing is a crucial step for youngsters to secure their financial future. By investing early, they can take advantage of the power of compounding and build wealth over time, while also developing important financial literacy skills.
Therefore, we present you the 5 best investment plans for beginners:
1. Public Provident Fund (PPF): PPF is a government-backed savings scheme that offers guaranteed return and tax benefits. The minimum investment is Rs. 500 per year and the maximum is Rs. 1.5 lakh per year. The investment has a lock-in period of 15 years, but partial withdrawals can be made after 7 years.
2. Equity-Linked Savings Scheme (ELSS): ELSS is a type of mutual fund that offers tax benefits under Section 80C of the Income Tax Act. The investment is made in equities, so the returns are market-linked and not guaranteed. The minimum investment is Rs. 500 and there is a lock-in period of 3 years.
3. National Pension System (NPS): NPS is a retirement savings scheme that is managed by the Pension Fund Regulatory and Development Authority (PFRDA). The scheme offers tax benefits under Sections 80C and 80CCD of the Income Tax Act. The minimum investment is Rs. 500 per month and there is a lock-in period until retirement.
4. Fixed Deposits (FDs): FDs are a popular investment option for risk-averse investors. They offer a guaranteed return and are offered by banks and non-banking financial companies (NBFCs). The interest rate on FDs varies depending on the duration of the investment, and the interest earned is taxable.
5. Gold: Gold is considered a safe-haven investment and is often used as a hedge against inflation and economic uncertainty. Gold can be bought in various forms, such as physical gold, gold ETFs, and sovereign gold bonds. The returns on gold investments are market-linked and not guaranteed.
It’s important to note that while the above-mentioned best investment offers various benefits, they also have their own risks and limitations. It’s advisable to consult with a financial advisor to determine which investment options are best suited for your goals, risk tolerance, and financial situation.
