How to Start Investing while You're Still at Your First Job?

Most youngsters seek an answer for ‘When is the right time to start investing’, especially when they’ve just started investing. The answer to this question, at any stage of your life, is ‘as early as possible’. You should start investing on your own, right from your first job. So there are some of the common options for best investment which is evergreen such as ideal FD schemes, saving account, gold, PPF etc,

The earlier you start, the sooner you can meet your life goals, which can range from planning to buy your own bike, your high-end laptop, or swanky smartphones, and even your own home.

Check your Liabilities

Once you receive your first salary, you should start calculating your liabilities like rent, telephone bills, grocery bills and other necessary monthly expenses. See how much you are left with. Calculate, how much of your annual salary falls under the taxable income. If your net annual salary is below Rs. 2,50,000, you do not have any taxable income and may not need to worry about investments that may go into tax-saving schemes as of now.

However, if you have any taxable income, you can save up to Rs. 1,50,000, by investing in schemes under Section 80C of the Income Tax Act. These could be Provident Fund, ELSS (equity linked saving schemes), tax saving fixed deposits and unit-linked life insurance products. Bear in mind, while some insurance products have return benefits, term insurances should be treated as insurance products and not as investments that fetch you returns.

Set your Financial Goals

Once, you know, how much you spare monthly, for your investments, the next step is to set your financial goal based on your life goals, which could be short-term and long-term.

Tip: Try and save around 10% of your income to start with. Reduce your expenses, if you cannot save even 10% of your income. Slowly, increase it to the maximum you can afford to invest.

Calculate, how long it will take you to achieve your goal. Depending on your risk capacity, which is directly proportional to your financial goal, choose your investment product wisely.

What Options do you Have?

What’s confusing for first-time investors is the number of choices that one has. The choices can be broken down depending on the periodicity of the goals. Tip: Do not put all your eggs in one basket.

1.       Short-Term: Recurring deposits, fixed deposits (FD) or short-term debt funds should be on your consideration table. You can start with recurring deposits and once you have saved enough, switch over to fixed deposits, switch over to fixed deposits, as they promise assured and high returns. One best option is NBFCs Fixed Deposit, which offers a high-interest rate of 7.85% on FDs. You can use online FD Calculator to check how much you can gain from the interests.

2.       Medium-Term: ELSS, balanced funds, ULIPs are a good option for medium-term goals. ELSS while will help you save taxes, they come with a mandatory three-year lock-in period. You can start with as low as Rs. 500 per month. FDs too can be considered for mid-term investments. They are evergreen and we reiterate they come with assured returns. You can choose from a period of few weeks to 10 years to stay invested in FDs.

3.       Long-Term: It’s your first job. But it’s also the right time to plan for your retirement. So long-term saving instruments like National Pension System (NPS), PPF (Public Provident Fund) and EPF (Employee Provident Fund) are safe bets with assured returns. You can consider equity-linked mutual funds too, which could give you higher returns.

However, be warned that mutual funds are linked to the stock market upheavals; and while they are alluring, they guarantee no returns. You must create a diverse portfolio, which enables you to save smartly and make the most of your investment returns.

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