Tips for investing early in life

By SiliconIndia   |   Friday, July 29, 2011   |    2 Comments
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Bangalore: "Investing money is something old people do," is the erroneous notion we youngsters grow up with. Our dreams have no boundaries. We have fascinating dreams of retiring early, travel round the world, and live by the beach after retirement. For this you need to be financially sound, and money does not flow in overnight. Remember "the early bird gets the worm." This holds true even in investments and saving. People who just kick started their career, what is investment for them? To divide a portion of their salary in some savings account and spend the rest however they want. It's true, at a young age to invest is truly difficult due to various distractions and expenditures. But let me remind you time is an investor's greatest tool for success. If you are aware of the several advantages and benefits you receive and can enjoy in the longer run, then investing early is the next thing you would add to your list. Check how early investment helps you, Sayed and Raghu joined work together at the age of 25. Sayed being a smart investor plans of investing Rs. 1000 per month in a mutual fund. And Raghu like the majority of us thinks it's too early to plan for an investment. After a few years Raghu too starts investing in mutual fund. They want to retire at the age of 50. Now with 10 percent rate of return during inflation, Sayed receives Rs. 11.80,165 while Raghu managed to save only Rs. 3, 81, 270. This example surely unfolds the benefits of early investment. If you plan on investing early, follow these tips Set aside an amount You could be completely occupied with your job and in such a scenario you don't have time to think of something as complicated as investment. But something that you can do is to have a simple budget in order to assess your spending. Fix a budget that will help you segregate your needs from your desires. Apart from this, you can also create an emergency fund for an unpredicted crisis. It could be 3 to 6 months' of your salary. Once you have a clear divide of your expenses you can estimate how much you can set aside for investment. Know your financial goals A very essential thing is to know your financial goals. List your priorities like want to buy your dream home or have your own car. While setting your individual goals, you should know your goals exactly. And make an estimation of how much money you need to achieve that goal. Have an investment strategy You require a good planning before investing in monetary markets. Especially in distinct planning for asset allocation. If you are not certain of when to enter and exist the market place, asset allocation may assist you. Know your goals, plans and your character before investing in monetary markets. Have an investment objective set before you. Do not invest all your money in single source It is good to have a balanced portfolio. Do not invest your money in a single source. Have different investment option like stocks, mutual funds, fixed deposits . One rule of investing, for both large and small investors, is asset diversification. Diversification involves the mixing of investments within a portfolio and is used to manage risk. The benefits you receive are as follow Time is on your side As I mentioned earlier time is an investor's greatest tool for success. When you start investing early in life you will have a longer period of time in earning profit. You get several opportunities to have different source of income. And with this you can put more money in different investment portals. This eventually will lead you to a more financially-free and successful way of living. Compounding returns compounding returns are definitely powerful as time goes by. The earlier you invest and put your resources into this business the more you'll benefit from the consequences. With this you can earn a lot. By adding premium on normal investments or a retirement account, it will surely bring you a large compounding result and benefits. You can improve your spending habits An important aspect you learn by investing early is, you get more focused and attentive in terms of spending. You begin to prioritize your need and make purchase based on that. You save that budget to fulfill your dreams. In so doing you will be saving more and eventually earning more as well. Quality of life The benefit you receive is you improve the quality of life as time passes. All your future plans get accessible. Thus life would be easy for you and your family. If followed the above suggested tips you can providing a secure life for your family.
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