1. Mutual Funds
Mutual Funds are money that is pooled together by many investors and managed professionally by a fund manager. It's a trust that collects money on behalf of investors who share a common investment goal. The money can be invested in equities or bonds, as well as other financial instruments. Each investor owns a percentage of the fund's total assets.
Mutual funds can be a great investment option for early-stage investors, as they are easy and affordable to research and purchase. Most mutual funds require a minimum lump-sum investment of Rs. 1000 to Rs. Investors can invest as little as Rs. These funds allow investors to start a SIP for as low as Rs. 100 each month. High-risk Mutual funds can offer annualized returns up to 30-35%. Section 80C allows mutual funds to be exempt from tax.
These are the top Mutual Funds that you can invest in.
ICICI Prudential Focused Bluechip Equity Fund
Aditya Birla Sun Life Small & Midcap Fund
Tata Equity PE Fund
HDFC Monthly Income Plan- MTP
L&T Tax Advantage Fund
2. Life Insurance Policies
The younger and more healthy you are, the less expensive life insurance will be. Because you get older, your chances of developing health problems that can increase the cost or make you uninsurable are higher. Life insurance policies are essential in your 20s.
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Life insurance can be a smart financial decision. It provides a safety net for your loved one and beneficiaries in the event of your death. Your family might be dependent on your income, and you may have large educational loan debts. Your premium will not change if you purchase a policy for more than 30 years when you are still in your 20s. If you wait 15 years, your premium will increase. It is a good idea to buy insurance policies as soon as possible. You should have the following insurance plans in your portfolio:
Life insurance
Health Insurance
Personal accident/Disability coverage
Financial experts recommend against investing in Life Insurance policies as they have had poor returns.
3. Shares/ETFs
Simply put, investing in shares is like investing in businesses. You buy shares in a company and invest your money in its business. In return, the company pays dividends. Your investment in the company will increase as the company performs well.
Your 20s is a great age to learn about the share market and how you can invest in shares of different companies. Although the stock market can be volatile, it is crucial to identify the best companies to invest in. This is done by performing fundamental analysis as well as technical analysis of the company’s share price over time.
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The right company can be very profitable over the long term if you invest in it. For example, if 1 Lakh INR was invested in HAVELLS shares back in 2005, it would have grown 100x to 1 Crore by 2021. This is why it's important to invest in the right stocks in order to get more returns.
ETFs, also known as Exchange Traded Funds, are security products that track an Index sector or commodity. However, they can be bought or sold on the same stock exchange as regular stocks. NIFTY 50, a benchmark Indian stock exchange index, is the weighted average 50 largest Indian companies that are listed on the National Stock Exchange. These indexes can be invested in just like shares of any other company. Indexes are used to measure the performance of a particular sector, commodity, or asset and therefore are less risky than investing in shares.
4. Purchasing a House/ Investing in Real Estate
Buying a house is probably the biggest life goal for Indians between the ages group 22 to 45. A 2019 survey by Aspiration Index found that Indians aged 22 to 45 consider buying a house and saving money for their children's education to be the top long-term goals. A house is a good investment choice. A home is the most tangible asset that you can invest in, given India's obsession with tangible assets. Owning a home has the obvious financial advantage of price appreciation, which builds home equity. A home purchase can also bring tax benefits. Section 24 of the I-T Act allows interest deductions up to Rs 2 Lakh, which includes 1/5th interest earned during construction.
Although buying a home in your early years of working life can seem overwhelming, as you may not have sufficient capital to make a downpayment on a house during this time, it is possible to save enough money in your late 20s and start saving up for the down payment so that you can consider purchasing a house.
5. Fixed Deposits (FDs) and Recurring Deposits
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Fixed deposits are a great way to increase savings while maintaining maximum safety. You can make a lump sum deposit with your bank/financier, and then choose the tenure that suits you best. The tenure ends and the deposit earns interest for the duration of the term at the rate you have set.
Like an emergency fund, it is always a good idea to have a short-term savings plan. You can keep an RD for 6 months to one year, which will ensure you have enough cash on hand. Many banks offer interest rates between 6% and 7%.
If you are looking for low-risk investment options that offer both security and liquidity, FDs or RDs can be a good option. You can begin investing in these instruments as early as your 20s.
6. Investing in Precious metals – Gold/Silver
India's people love to invest in precious metals such as Gold and Silver because they are a sought-after commodity for centuries. The rare and highly liquid asset of gold is unique. It is used to hedge currency risk and protect against inflation losses. Gold is a better investment than Silver because Silver prices are constantly under the shadow of the Gold market.
Let's compare the prices of 10 grams of Gold back in 2000 and 2021 to put the situation in perspective. The price for 10g of 24K gold in 2000 was as low as 4400 INR. In 2021, the price is almost 50,000 INR. This represents a gain of 1036% over 21 years (CAGR 12.27%). You can see that Gold is a smarter investment option than fixed deposits in Banks (7%) and low-risk mutual funds (8-10%).
If you are looking for an investment that is safe, liquid, and offers decent annual returns, then Gold can be considered. Investing in Gold comes with storage risks and theft risks. Therefore, one should be careful and plan for safety and storage before investing.
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7. PPFs
The central government has created the PPFs, a long-term retirement savings scheme that currently offers 7.6% interest per year. It is best to start investing at the beginning of FY (beginning at Rs. To reap maximum benefits, you should invest between 500 and 1.5 lakhs. It can be extended in five-year increments after maturity. All interest, capital, and proceeds are exempt from tax (also known as EEE benefits).
If you don't want to take greater risks with your savings, but still wish to invest for tax benefits and average returns, PPFs might be a good option.
8. Cryptocurrencies
Cryptocurrencies are a popular, but risky, investment option that is gaining popularity. Cryptocurrencies can offer higher returns over a shorter period of time. BITCOIN is becoming a popular buzzword and investors are increasingly interested in investing in it.
Cryptocurrencies are digital currencies that use cryptography to protect their privacy and security. Blockchain technology is the basis of security. It is simply a shared digital ledger that is linked in blocks and then made available to the public in a shared network. Due to the complexity of interbank transactions globally, exchange rates must be considered. This can lead to higher transaction costs. Because they accept the same rate globally, cryptocurrencies solve the problem and allow transactions to be completed much quicker than the existing process. Cryptocurrencies will be used to make transactions quicker and easier for larger businesses as well as people who need to travel frequently to other countries.
It is important to learn about the various projects and understand the importance of cryptocurrency before you decide to invest. Bitcoin is the most widely used cryptocurrency and has the highest market capitalization. Ethereum and Binance Coin are close behind.
The 20-year-olds are the most risk-averse and have some money after other investments. Keep in mind that cryptocurrency prices can fluctuate and one should only put money that they are willing to risk in the event that things don't go according to plan.
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