38 Investment tips for the Young

Sometime back, my wife had asked me to write about this topic as many people in her office were not aware of how to go about doing this.  At that time, since I had already thought of some other topics for the blog, I ignored it.  Now, having thought of at least 7-8 more topics for future writing, I am writing on this topic.

The “Young” in this topic would range from “people who have recently started working” to “people who recently got married” to “people with kids below 5 years”.  Normally I consider myself also to be young as it is the state of your mind.  Others can also make use of this in case they find it useful and follow-able.

As soon as you receive your salary, just remove about 25% of your salary and put it for savings. Have an automatic debit set-up so that you need not worry about forgetting to do it on a monthly basis. Try to live within the 75% of your salary.  It has been done before and would be doable in the future also.  Just imagine that your salary got reduced to cushion your future.  Many of you would be working in private firms where there will be no work for you once you cross 45-50 years.  Unless you have a considerable sum stashed somewhere, it will be difficult for you to live your life as you have been living now.  Try to live within your means and you will be healthy, both physically and mentally, in the long run. Don’t live by looking at your neighborhood!! 

Put about Rs 1.5 lakhs in Public Provident Fund (PPF) in SBI or ICICI Bank.  If both husband and wife are working, open 2 different accounts and put Rs 1.5 lakhs each in both accounts per year.  If this amount sounds big, invest Rs 12,500 per month in the PPF.  Make sure you select the Auto-Transfer option so that this amount gets directly transferred from your salary account to the PPF account each month.  This Rs 1.5 lakhs will also ensure that your 80C section in income tax is taken care of.  Moreover, when the amount matures, the entire interest that you would have earned, is tax-free.  If you are still left with some money, put it in an Systemic Investment Plan (SIP) every month.  Make sure you go for an Equity fund.  When you withdraw after a couple of years, there is no tax on the redemption as investments in SIP is tax free after one year of holding.

Don’t go for life insurances. Use the money to enjoy your current life.  Get a medical insurance for you and your family.  Even if your current employer has a medical insurance scheme, have a separate one outside.  You never know when you are changing jobs and when you may need the insurance.  And you can also deduct this medical insurance amount from your taxable income.  Get a family floater scheme which covers the entire family.  Over a period of time, the cover also gets increased, in case of no claims.

Go for your own house in case you can afford the monthly installments, in addition to the above mandatory savings.  Else live on rent.  Use the not-paying-house-installments to increase your savings.  In case your job gets transferred, you can easily go and settle in the new city without having to worry about your current house!

Start living economically, not frugally, for a better future for yourself!!  Cheers!!

Today’s daffy definition

Motorist – A person who keeps pedestrians in good running condition!!