Know How to Invest at Every Age for Larger Returns

• 19th Dec 2018
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Today, to survive, early investing is a must. You are never too young to start investing. There is no denying that initially, investments may seem daunting, and with so many options, you are bound to get confused and overwhelmed. The investment language itself is different and till you get a hang of it, words may seem like Greek and Latin to you. The main purposes of investments are usually for wealth accumulation, saving for a retirement corpus, taking care of inflation, and protecting your loved ones.

The sooner you start investing the better. Early investing will let you have more time to let your investments build up into a large corpus over time using the simple concept of the power of compounding. Not only that, one of the primary benefits of investing early is that you can go all out by starting to invest during the beginning of your career. 

Let us consider investment options as per age.

If you have started early investing in your late 20s or early 30s, you have plenty of time in hand. You can experiment with multiple financial instruments depending on your financial goals.

There are multiple benefits of investing early. You can mix and match till you find what works best for you. You can try investing in the stock market. Even if you face minor losses, you have enough time to make up for it. If you have the financial appetite, you could look at investing in real estate. You could either purchase a home for living in or buy a property, which you can rent out. You can also contribute a certain percentage of your salary to the Employee Provident Fund account so it can build up into a retirement corpus for you. You could also try investing in stock funds and ULIPs. It also depends on your risk appetite. If you do not want to take a risk, you can opt for a target date mutual fund. This ensures that you start with aggressive investing at a fast pace while you are young but become more conservative as you grow older and get closer to retirement. 

As you near your 40s, you can start looking at investment plans, if you have not done so till date. In addition, you must consider contributing to the Employee's Provident Fund if you have not yet started it. You could look at giving at least 20 percent of your salary to the same so it accumulates as your retirement corpus.

Another option is to start asset allocation. At this time your assets should lean more towards fixed investments as well as bonuses compared to your 30s. If you are a conservative investor who wants to avoid risks, you should be comfortable going for a bond allocation of around 40 percent and stock allocation of approximately 70 percent. 

As you enter your 50s, it is time to exercise some more caution. You must stop, step back, and take stock of your current income, assets, and liabilities. You also need to make note of your potential income as to how long you will be working and if you have any alternate source of income, among other factors. Take stock of your tax situation as well. You need to diversify your investments. You can take a 50-50 mix. Invest half of your money in bonds and the remaining half in stocks. Once you analyze the above factors and ponder over it, you can decide on the best investment mix. You also need to look at creating income from your investments (if you have not already done so). 

One of the main benefits of investing early is that it gives more time for your corpus to grow. However, no matter when you start investing, ensure that you have a clear idea of your financial goals. Investments are subjective. You invest so that you can meet your financial goals. No matter what your goals are, with a systematic investment approach, you can definitely get there!

- A Consumer Education Initiative series by Kotak Life