There’s no time like your twenties to start putting your money to work for you so that you can achieve your financial goals throughout your life. Developing good spending and saving habits and learning to budget and invest during your twenties, can help you prevent needless debt.
The 20s is that phase of life when you have lots of aspirations and dreams to chase for, challenges facing off, and opportunities to prove your metal. In the mid-20s, You are done with your education and started a new job or business. This is a time to start your financial planning. As 20 years old, you have something that a lot of people don’t have: TIME! Let’s take advantage of it and set yourself up for early Financial Freedom.
Starting early will definitely help you to keep yourself way ahead of the crowd provided you be consistent in investing and keep invested for long. The half battle is won when one starts investing in their 20s. And full battle can be won when you do the right kind of investment with discipline and consistency.
Nowadays for the last one and a half years, one trend can be seen among young earners to explore the equity asset class more aggressively. Lockdown days provided apple time to them to explore equity investment. One can invest in equity in 3 ways
- Direct Equity- stock Investment
- Equity mutual funds
- Derivatives, intraday trading, and future and options
Over the last few years, most of the Investment in the equity asset class comes with direct Equity than equity mutual funds which is a sign that investors are looking for an extra return in lesser time. but always remember.
There are no shortcuts to SUCESS as well as FINANCIAL FREEDOM
Penetrations of the equity asset class in retail investors were done through mutual funds as they are comparatively less risky than both the remaining options stated as well as one can start investing in those funds a small portion if saving is less initially. But this route needs patience and discipline in Investing to gather sizable wealth.
If you start your investment journey with a Goal-based approach, things are much simpler in terms of segregation of investment amount in different asset classes as per the need of the money according to the time. Identify your life’s financial goals and divide those into short, medium, and long-term goals. This exercise at yearly days of your earning will build your investment paradise firmly.
When you follow the goal-based investment here risk management is more crucial than running behind the return blindly. For the retail investor accessing the risk involved in equity investing is really not easy to understand or analyzed. So in the case of penetrating in equity asset class through the Equity Mutual Funds route is more advisable as here even if your investment amount is less initially and even you invest in a simple Index fund, you can own 50 prominent stocks where your risk is more diversified and managed. So for creating sustainable wealth always choose the first options when you are native. .
For investing in Direct Equity one needs to have a good amount of knowledge of technical and fundamental aspects of the scrips. Give yourself time to learn Direct equity investment by reading the balance sheet of the company, understanding the nature of the business and different parameters needed to make a well-informed decision of buying a particular stock.
That’s why in that comparison Equity mutual fund is well managed by the fund managers and their team. In direct equity, I advise my clients to stick with blue chips stocks only and venture into mid and small-cap segments via good flexi cap funds so that their risk is well spread and there is a chance of earning good returns.
In Direct Equity investment, you can select the top 5 sectors and, in those sectors, select the top 2 companies. You can purchase stocks in such companies when you find a fair valuation. Kindly follow 70:30 ratios in mutual fund and direct stock investment.