A recent survey commissioned by Ally Financial found that 70% of Americans between the age group of 18 to 39 know that they will eventually need to be more financially secure, but don’t know how to get there. 61% percent of those respondents found investing in the stock market to be “scary or intimidating,” with Millennials feeling more intimidated than those in other age groups.
Most millennials were busy spending money and hardly worried about savings.Although,investment at a younger age can reap several benefits.
Let’s analyze the advantages of investing early on:-
Millennials certainly would have more time to accumulate wealth. They can maximize returns through compounding merely by staying invested in the market. (For example, A started investing at age 25, putting 14,000 a month in a tax-deferred retirement plan earning 9%. While B starts investing in the same plan at 45 but puts away twice as much money as A. At age 65, both A and B would have invested a total of about 68 lakhs, however,A ‘s investment would have grown to 6 crores while B’s investment would be worth only 2 crores. Here, the reason A’s investment has grown so much more is because of 20 extra years of compounding.)
By investing in Mutual Funds too, millennials can earn higher returns. Additionally, investments can also help investors earn dividends, or small cash payouts, which can further lead to growth of money.
Money kept in a bank’s saving account may gradually be eaten away by inflation; however, the right investments can earn returns that beat inflation. For example, Debt funds are ideal for investors who expect steady returns. Such funds are less volatile and, hence, less risky. Further, if money is growing or earning a return, it’s surely going to help reach financial goals faster.
Investments in instruments like Public Provident Fund (PPFs), Equity Linked Savings Scheme (ELSS), Unit Linked Insurance Plan (ULIPs), etc. offer tax deductions under Section 80C of the Indian Income Tax Act. By investing in these schemes, a millennial can legally save tax liability instead of paying more taxes.
One’s financial situation mightpossibly become feeble at times; therefore, investing at an early age will help when in crisis. However, before planning for investments, it is essential to figure out the right investment plan according to an individual’s needs and preferences.
Here are a few things to keep in mind when planning investments:-
Investments can be tricky. Therefore, it is important to have adequate knowledge of different avenues before selecting the most suitable one. One can refer to Wealth Management Training Programs to understand the benefits and risks involved in the plethora of investment options available.
“Do not rely on a single income; make an investment to create a second source.” – Warren BuffetEnquire Now