It’s the single biggest
investment mantra that never fails and a time tested fact that investing early
gives you the best possible returns – be it mutual funds, bank deposits, stock
markets or any other investment avenue. While there is no age limit for knowledge
and one can achieve it at any point in life, investing and savings work best if
one starts early.
India is a young country
per se with its average workforce in the age of 25 that earns anywhere from 2
to 3 lakhs per annum or even less; and a majority of these are people who are
just starting out with their career. Now it may so happen that people tend to
push investment planning to the back burner over other priorities. This
essentially stays as it is for the initial years of a person’s career.
Formulating a Strategy
It is extremely
essential for those who have just begun their career, to make financial
planning very early in their career to get the best benefits of their hard
earned money and secure their future without having to compromise on their
The recommended way to
do this is to take a balanced approach at investment planning by first
identifying near and long term goals and objectives, identifying your financial
risk appetite and then accordingly working towards your objectives.
Outlined below are the
key essentials that can help you draft your overall investment planning strategy.
Building up a Savings
Now before you even get
into building an investment or financial planning strategy, it is advisable to
build initial savings which according to a person’s capability can be the
equivalent of 3 to 6 months of your monthly salary or expenditure. This savings
pool ensures that you have something to dip into, in case things go unplanned
such as a temporary job loss or meeting other emergency expenses.
Insurance is one of the
most essential components of financial planning. More than a mode of
investment, life insurance should be
used to secure the financial condition of your near and dear ones. Before
subscribing for life insurance, however, you would need to appropriately
determine the optimum amount of coverage required to take care of your
liabilities and your dependant’s needs. There are a variety of insurance
products to choose from including hybrid products such as united link insurance
plans (ULIPs) that offer the benefit of both insurance and investment.
At the outset, you might
get the feeling that you won’t need health insurance. After all, you are young
and it is not likely that you might fall sick or seek hospitalization that
often. But the perception, however, is incorrect as health is something
that should never be taken lightly. The irony of the situation, though,
is only those who have benefited from health coverage understand the true value
of health insurance coverage. Seeking health coverage to meet health care and
hospitalization expenses for you and your family can help you save a lot on
healthcare expenditure should there ever be a need. Health insurance policies
are definitely a must-have option when you formulate your financial planning
strategy. The benefits you can expect to enjoy include cashless treatment,
cost of treatment under the coverage plan treatment, list and expenses of
Other Long and Short
Term Investment Options
These can be a smart mix
of financial instruments right from equity based investment schemes to
traditional investment products such as bank fixed deposits. Options can vary
from stock markets, mutual funds, post office deposits, bank deposits,
government bonds, PPF amongst others. The ideal approach again would be to
appropriately identify your risk appetite and then choose a suitable product.
For instance, those who have just begun their career can afford to take more
risks and thereby can have increased exposure to equity based investments. They
can then accordingly fine tune their portfolio to move to lesser risk averse
options as they mature.