Investing is a smart option. Infact THE option to get yourself rich when you grow up! Investment can be in the form of company stocks, mutual funds, and real estate; just to name a few. These are all alternatives for adults. But how can teenagers and, young adults invest their money for a better future for themselves?
We are here to tell you how.
Teenagers and young adults, by investing their money in something worthwhile make it easy to become richer in a shorter span of time. It’s the smart thing to do in this economically unstable world which is the scenario today.
First things first, you must have a strategic plan. Planning is of paramount importance before making any investment. There are plenty of people to help you out in this case, from stock brokers to financial advisors at your local bank to investment newsletters. Basically, the two aspects you need to think about are –
- Investment Money
- Investment Pattern
Investment Money simply refers to the money that you would invest with. For young adults, this might be pocket money from parents, gifts from relatives, regular income from odd jobs and the like. What you need to decide is, will you save every month and then accumulate money to invest? Or would you invest as and when money comes to you? That is your investment pattern.
If you get small amounts of money, let’s say pocket money or income from odd jobs, etc and would like to save a bit every month, accumulate and then invest, the best bet is to go for a Recurring Deposit in any Bank Savings Account. In a recurring deposit, a specific sum of money, even if it is Rs. 500 gets deducted from your savings account and goes to a specific recurring deposit account on a specific date each month as pre-determined by you. This is the based way to achieve forced savings in order to accumulate enough money to invest in one or more investment tools of your choice.
In case, your investment pattern is to invest lump sum money into investment tools, you just need to understand the different tools available and go for the one which suits your financial goal the most.
Mutual Fund SIP’s, Stocks & Bonds:
An important and useful tool is Systematic Investment Plan (SIP) which is a financial planning tool which helps you to increase your wealth by investing small amounts regularly in a regimented manner. This tool is offered by mutual funds.
Know the basic information. It is essential to understand key terms, formulas, as well as the entire process of what you are investing in. You usually invest in securities through Stock Markets and Securities Exchange; there are many foreign ones such as the New York Stock Exchange (NYSE) and Tokyo Stock Exchange. In India, it is the National Stock Exchange of India.
In order to invest in a company, it is necessary to know and comprehend how a company goes public, making it possible for you to invest in its stocks via the shares and stocks market.
So, once you buy or invest in a stock from a particular company, you become a part owner of said company. Before investing, it is vital to know which sort of stock to invest in, Common or Preferred.
Making money from stocks is relatively simple as essentially, there are only 2 ways:
- Selecting and investing in those stocks that will increase in value over a given period of time after which you can sell said stock for a value higher than what you purchased.
- Selecting and investing in those stocks that pay high dividends, i.e. a distribution of earnings to the shareholders.
It is also important to continuously track and monitor how the market is doing, is it going up? Or is it declining? Having stock market apps on your mobile phone makes it easier for you to keep track with constant alerts. Indexes are the most commonly used measures of the market.
Investing in bonds is another opportunity. This is only slightly different from stock as it more or less a small type of loan which is given to a person or company. This over time earns interest and once it has been fulfilled, you as the investor are able to gain the rewards of said investment.
A long term investment option is Public Provident Fund (PPF) which is backed by the Government of India. This choice offers handsome interest rates and returns which are fully exempted from taxes.
Investing in life insurance is another valuable option. This can also be done via monthly payments or annual lump sum payment over a pre-determined period of time. You can go for a ‘money-back’ option where the interest you earn will be paid back to you in installments over the years, or you can go for a ‘maturity’ option where the entire accumulated interest comes at the end of the maturity period along with your principal amount.
As a conclusion, it can be said that irrespective of the investment tool, the basic objective of investment from a young age is to make your money (however small it is now) work towards making more money. The younger you start, the more your money has the opportunity to make more of its own kind. So sooner the better….or, richer! So what are you waiting for? Get your thinking caps on, bring out your wallet and get set go! Invest to get rich!