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.