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What are the Best Investment Options for Young Adults?

As a young adult, it is important to start investing early to secure a financially stable future. There are several investment options available, each with its own benefits and risks.

  • 13,750 Views | Updated on: Jan 10, 2024

As a young adult, you start saving; you need to think about maximizing your savings. And the best way to do it is to invest in the best investment options. You must be cautious of wrong moves and understand your financial needs, both short-term and long-term.

As an individual, when you reach your mid-twenties and are now stepping into the professional world and a systematic 9-5 routine, you start taking on multiple responsibilities. This is the time when you start becoming independent and self-reliant. However, as you dwell on a more serious life, you realize the importance of dealing with finance and investment.

Therefore, you start taking your expenses and bills more seriously and cutting on them wherever possible. Unfortunately, however, most young adults do not get paid handsomely enough to live a lavish life in the starting years. Thus, all the seriousness leads to worry, increasing the importance of saving and creating wealth.

Once you understand your financial needs, you smartly decide which are the best investment options for young adults in India.

In this article, while sharing a list of the best investment options for youngsters, we will also briefly describe why the below-mentioned financial schemes are the best investment options for young adults in India.

Five Best Investment Options for Young Adults in India

Investing your money wisely is one of the smartest decisions you can make, especially when you are young and have time on your side. But with so many investment options available, it can be overwhelming to know where to start. That is why we have put together a comprehensive guide to the five best investment options for young adults in India.

The Indian Post Office Saving Schemes (Post Office Savings Scheme)

Trust is a critical factor when you are planning to invest. And as a young adult, the top priority is to have secured investment. Thus, the Post Office Savings Scheme is a trusted organization to park your money. Moreover, as the organization is completely government-backed, they offer absolute capital protection on various schemes and a competitive interest rate.

PPF (Public Provident Fund)

PPF is a long-term saving scheme devised by the central government of India. Apart from offering a high-interest rate, they are a great way to make tax-free savings. At maturity, the capital, Interest, and proceeds are all tax-free. This is why the PPF scheme is called an EEE benefit scheme. You can invest between ₹500 to ₹1.5 lakhs in one year. However, it is advised to invest the maximum amount at the beginning of the year to reap the maximum benefit of the PPF scheme.

RD (Recurring Deposit Account)

It is important to possess some emergency funds in your hands for immediate needs as a young adult. Recurring Deposits ensure that you have such funds for any emergency. Having an RD of 6 months or 1 year makes sure that you have disposable liquidity readily available and within reach. The thing that makes RDs one of the best investment options for young adults in India is that they offer a good interest rate of 6% to 7%, depending on the banks.

ULIPs (Unit-Linked Insurance Plans)

ULIPs are a great pick if you are looking for long-term investment options for young adults. Being an investment plan that also offers insurance coverage, Unit-linked insurance plans are those flexible modes of investment that allow young adults to invest as per their financial needs and risk tolerance capacity. From equity funds to debt funds or hybrid funds that are a combination of both, ULIPs help investors to earn a good return while offering protection against uncertainties through life insurance cover.

SIPs (Systematic Investment Plans)

The best part of SIPs is that they offer you a wide range of investment options and the ability to grow in sync with the market. While equity funds are popularly known for their high return potential but at the same time, many believe that it requires a large spare amount to be invested. However, SIPs are made for investing the smallest possible amount to larger sums according to your convenience.

Why Should You Start Investing When You are Young?

Investing is often thought of as something that older, more established individuals do. However, investing at a young age can have numerous benefits that can positively impact your financial future. Let us dive in and understand the reasons why you should start investing when you are young.

Compounding Interest

One of the most significant advantages of starting to invest at a young age is the power of compounding interest. Compound interest is the interest earned on both the principal and accumulated interest of your investment. The earlier you start investing, the longer your investments have to compound, resulting in significant long-term growth. Even a small amount of money invested regularly can grow significantly over time.

Time is on Your Side

When you start investing at a young age, you have something that older investors do not have: time. With more time, you can afford to take risks and ride out any market fluctuations. As you grow older, you may need to adjust your investment strategy to be more conservative as you approach retirement age. Starting early gives you the luxury of time to explore different types of investments and take more significant risks that can potentially lead to higher returns.

Develop Good Financial Habits

Investing at a young age can also help you develop good financial habits that will benefit you throughout your life. By starting to invest early, you will learn the importance of saving and budgeting. You will also develop discipline, patience, and long-term thinking, which will serve you well in all aspects of your financial life.

Higher Earning Potential

Starting to invest early can lead to higher earning potential over time. As your investments grow, you can reinvest your earnings to generate even more significant returns. Additionally, the money you earn from your investments can be used to start new ventures or invest in other opportunities that can increase your overall wealth.

Achieving Long-Term Goals

Early investment can assist you in achieving long-term financial objectives like home ownership, business startup, or early retirement. By starting early and consistently investing over time, you can accumulate wealth that can be used to achieve your dreams and aspirations. Investing can provide a solid foundation for your financial future, ensuring that you have the resources you need to accomplish your goals.

What are the Easiest Investments for Young People?

Investing is an essential tool for building wealth and securing a financially stable future. As a young person, it is crucial to start investing early to take advantage of compounding interest and allow time to work in your favor. However, with so many investment options available, it can be overwhelming to know where to begin.

Exchange-Traded Funds (ETFs)

Exchange-Traded Funds (ETFs) are investment funds that trade like stocks on an exchange. They offer diversification by investing in a basket of stocks or bonds, reducing the risk of investing in a single company. ETFs also typically have low fees and are easy to buy and sell. For young people who may not have the time or expertise to manage a portfolio of individual stocks or bonds, ETFs can be a great option.

Mutual Funds

Mutual funds are another investment option that offers diversification by pooling money from multiple investors to invest in a portfolio of stocks, bonds, or other assets. Mutual funds are managed by professional fund managers, making it an easy and convenient way to invest without needing to research individual companies or assets. Some mutual funds have higher fees than ETFs, so it is essential to compare fees and understand what you are paying for.

Wrapping Up

This list of best investment options is not exhaustive; however, the schemes mentioned above are amongst the most commonly opted plans for you as young adults. Remember, a prudently planned investment can not only help you use your hard-earned money wisely but also enable you to create more wealth for financial stability.

    Key takeaways

  • ULIPs are a great pick if you are looking for long-term investment options for young adults.
  • Investing at a young age can also help you develop good financial habits that will benefit you throughout your life.
  • Mutual funds are another investment option that offers diversification by pooling money from multiple investors to invest in a portfolio of stocks, bonds, or other assets.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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