Why under 30s should start investing| North Loop Official Blog
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12 Nov 2020

Why under 30s should start investing

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Financial decisions made early on in your life has a more significant impact than the financial decisions made slightly later on in life. Studies say that investing in your 20s can easily surpass the returns made from any investments in your 30s due to the power of compounding. This financial freedom one experiences in their 20s can be quite overwhelming as this is the first time college graduates see a lot of money in hand and quite naturally, the expenses get gradually inclined towards luxuries as opposed to bare necessities. Retirement too is somewhat far-flung, due to which youngsters often spend the entirety of their income without a second thought.

But we’d like to emphasize the importance of savings and how the power of compounding helps individuals maximize their returns.

Why Invest at all?

Well, in short, investments help individuals meet their short term and long term financial goals like buying a house, buying a car, or anything else that a person desires. Investments also ensure that individuals are left with a small surplus which comes in clutch during rainy days/financial emergencies.
Let’s face it, it’s 2020, and just like how unpredictable this year is, any financial emergencies don’t occur with a prior intimation. It is absolutely vital for one to have some cash in the till to sail through predicaments.
In addition to this, savings also help one pan out a proper retirement plan- the golden age when you just need to enjoy life and not worry about cash crunches.

The 50-30-20 rule is a quite popular savings mantra people follow when making a suitable monthly budget. The rule states that 50% of the income is kept aside for rent, utilities, groceries, etc, 30% is kept aside for savings (ideally under ELSS, fixed/recurring deposits, and liquid funds), and the rest 20% for personal expenses (basically to treat yourself for the hard work you’ve put in).

People especially in their 20s are more inclined to invest in high-risk instruments such as equities or mutual funds due to their high long-term prospects. Mutual funds and equities are exposed to more risks as opposed to certain instruments like fixed deposits, government bonds, and Public Provident Funds; however, the returns are significantly more in the case of mutual funds than the other instruments, making it ideal for youngsters in their 20s.
Diversification, with regard to mutual funds, can also help individuals hedge risks and maximize returns. With instruments such as ELSS (equity-linked savings schemes), individuals can not only provide good returns but can also help individuals save tax under certain provisions of the Income Tax Act, 1961. What’s more- you can start investing via SIPs starting from just Rs. 500 in mutual funds offered by North Loop, ensuring that investments are suited for people across all income groups.

Start investing for free with North Loop and get personalized recommendations

How would I get started?

The task of making a proper financial roadmap isn’t the most tedious one. It’s simple- all you have to do is define your financial goal. Planning to buy a car? Keep the purchase price of your car as an investment goal. Planning to unwind in the Bahamas? Well, keep the cost of the tour as your investment goal.

Keeping a financial goal makes the investment tenure/duration slightly more clear and realistic and also defines the apt risk exposure you can withstand.

The step would be to do some digging into the funds/securities of your choice, assess the risk to reward ratio, and make a decision based on whether it is aligned with your financial goals or not.

If it sounds good, check the lock-in periods/ duration and the market volatility at the time and then decide to invest. Always go for funds or securities regulated by the SEBI (Securities and Exchange Board of India) and remember- It is not advisable to invest in schemes that offer unrealistically high returns over a short duration.

North Loop offers carefully chosen mutual funds offering round-up investing, bound by an automated set of rules and goals. North Loop also has a 256-bit encryption monitored 24/7, offering strong security as well. Click here to sign up with North Loop.

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.