How to start Investing in your 20s - Investment ideas to become wealthy | Elamaran Selvam

 The word "Investing" sounds to be a scary one for most of us since we are not even aware of what is really meant by investing, and some even have a misconception that investing ends up losing your money. Being in your 20s is a golden opportunity to taste the market for the long term, and staying invested helps you to be financially free from your early days of retirement. Here we will discuss Where to Invest your Money in your early 20s.

The financial situation in the 20s

When you are just graduated and landed on your first job, you will start earning more than you pocket money during your college time. Suddenly there will be a lot of money in your hand, but there arises a situation that you are no more dependent on your parents for your daily needs. Also, this is the period in your life where you would like to buy whatever you see, alongside you would also like to get rich from the money you earn. 

Well, how to achieve your financial independence while enjoying your 20s? Given below are some of the most commonly followed investment schemes irrespective of your risk profile considering a common, and minimal income background.

1. Post office scheme

From our childhood, we all have been using those post offices just to post our mails and parcels. Since in this digital age, we have so many social and messaging platforms to transfer our information, post offices have also digitally evolved to provide facilities like a Post office savings account, ATM, Cheque books, and other savings related schemes.

Post offices are a trusted place to park your money and ensure absolute capital protection on the money you invest. Most of their schemes provide more than 7% of interests on deposit and tax-free at the maturity period under 80C of IT Act. The Common plans of the post office are 5-year RD, National Savings Scheme, Post Office Monthly Income Scheme (POMIS), National Savings Certificate (VII) account, Sukanya Samriddhi (for girl child).

2. Public Provident Fund

A PPF or Public Provident Fund is a tax-free savings scheme offered by the Government of India. It provides higher interest than other commercial banks in the country wherein Interest rates for these accounts are set and paid for every quarter by the Central government. One can invest a minimum of Rs 500 and a maximum of 150000, where the current interest rate is at 7.9% yield. 

Like other savings accounts, there is a minimum lock-in period applicable for 5 years, post which the amount can be withdrawn without any tax impositions. Indian citizens residing in the country are eligible to open a PPF account in their name, and the best part is, even minors are allowed to open a PPF account in their name, provided it is operated by their parents. These accounts can be opened both offline and online in some banks and post offices.

3. Government Bonds and Treasury bills

These are called short-term investments, where your money will be invested in firms such as Government-issued bonds, treasury bills (T-bills), etc. Funds collected through these tools are used for short term requirements of the government, while they earn a minimal return of interests around 3.25 - 4%, assuring the capital you invested. These funds come with a minimum lock-in period of at least 91 days and not more than 364 days. When someone looks for a short term investment, then these funds could be a better option.

4. Recurring deposits

If you have a goal to buy your new mobile or any electronic appliances such as TV, fridge, AC, then having a recurring deposit for at least 6 months to 1 year could help you free from your EMI plans. While the minimum amount of investment differs as per the term you deposit, most of the bank offers at a considerably low amount of starting an RD from Rs 500 and keeps going as per your budget.

In general, RD's have an interest rate of 5.5 - 7% at maturity, which usually depends on the bank we invest. The additional interest rate of RD will be around 0.25 - 0.75% if deposited by senior citizen schemes. The interest from Recurring deposits is taxable at 10% if the income incurred is more than Rs 10,000.

5. Systematic Investment Plan

Systematic Investment Plan (SIP) is a method of an investment plan, where the investor will make a regular and equal amount of investment over a period. Most of the SIP investments are addressed to mutual funds, where the purchase amount equivalent units will be allotted depending on the NAV of the fund. Mutual fund SIPs provide a high return of 8 - 15% based on the fund we choose, remember high returns come with high risks, so don't forget about the market conditions while investing in Mutual funds. 

6. Life Insurance

In the process of saving money, one should never forget to get covered under Life Insurance schemes. In fact, it is a mandatory investment everyone should opt for irrespective of their salary in their 20s. Life insurances availed at younger ages comes with more benefits while paying lesser premiums; older you grow, more premium amounts you need to pay. These life insurances provide around 10 - 15% interest around indeed covering your life at required times too.

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