As we can see, at your age today, people become more financially independent through skills development. And, with this comes a spending power and a responsibility to understand the importance of investment, savings, and returns.
Well, not of them, but the smart ones do start investing at a young age. It is interesting how rapidly one’s attitude changes from consumption and spending money approach to a saving and investing approach.
Why should I invest in the stock market in my 20’s?
You should invest in the stock market in your 20s to reap these benefits of investing early in stock market:
Time Value Of Money
First of all, investments, or the process of buying stocks today to buy more stocks in future or to meet the need of more money requirement in future.
Secondly, you can meet the main purpose of investment is to generate wealth for your future by ensuring that it is made for a longer-term. This will make sure that you yield more results.
If you have ever heard of compounding, well, that will be a real game-changer for you. Compounding is the ability to grow an investment by reinvesting your earnings. So, as go on and earn money as the share prices increase and reinvest the same year after year to make sure that your final balance increases.
Afford More Risk
As young people have time in their hands, they can venture into investing by taking into account years of earnings ahead of them and can afford more risk in the investments. On the other hand, those who are retiring may gravitate towards low-risk or risk-free investments.
And the famous saying goes, more risk is equal to more returns which imply that your aggressive portfolio can earn you more profits. And even if you incur a loss, well, you have time ahead of you to make up for the loss eventually.
The Right Habit
If you start investing as early as in your 20’s, you will inculcate the positive habit of saving more.
The more you invest, the more you get in the future. To reach your target money, you will eventually facilitate your investment with the right habit of cutting on unnecessary expenses and divert your money towards investment.
Secured Future With An Emergency Fund
As we venture into the real world, we understand that nothing is permanent while your support systems begin to slowly depend on you, your responsibilities are set to rise.
On the same lines, you will have a secured future to look ahead to and urgent money to meet unavoidable and unexpected expenses. These times will allow you to have an early investment.
Support Your Retirement Plans:
While you have decades before you retire, the stock market is perfect to support your post-retirement plans and build wealth. Living in this tech-savvy world, you can begin saving for the life you wish to live in your twenties.
You can benefit from the wide array of platforms to learn and understand the working of stock market investments you can do easy paper-less investments from your mobile phone with small amounts through trading apps.
A good tip here is that you give time to your money to mature with an early investment in the stock market in your twenties.
So, what should be my action plan as an amateur investor?
For young adults, investing decisions today are great for today as they have one thing going in their favoured time even though they might be tight on money. So, here’s how you can work on investment as a beginner:
Mutual Funds: Similar to ask we go to a doctor for professional advice, we visit brokers and professionals for investment in the stock market especially when we are new and lack knowledge in the field.
Now, mutual funds take money from different investors and invest them in different company’s stocks. SIP or Systematic Investment Plans in mutual funds allows a young investor like you to start investing with less money and at the same time diversify into stocks of different companies which are selected by experts. This is the calculated risk you can take.
Besides these, you can choose your stocks and stock funds by comparing different stock investment options. They are riskier but offer your control.
But as speak multiplying your money, traditionally, in India, parents recommend saving over investing. From FDs to EPFs but the stock market, for someone young would not be suggested by elders. However, it's time to disrupt the thought process by taking calculated risks, especially if you don’t want to lose.