Wealth is not generated overnight. To be financially independent and in a good place, individuals must start young. The earlier they start the better they can earn. This means developing savings and investing habits early on in life. The millennial generation now forms a majority of the workforce. This means they will be building families of their own and will have to manage finances independently as their parents did. To take such steep steps one should have their finances in place. Only saving will not help in growing wealth, investing it in the right tool will. This requires research and patience. But to make it easier, here is a list of a few of the investment options that young investors can consider choosing.
- Direct Equity
This investment option is entirely based on market movements and is very volatile. It is a high-risk high-reward kind of investment tool. Young investors can park their money in company-owned stocks. This is like investing in the company. If the company does well the stock does well, and the investor can earn generous returns much more than fixed income instruments like the FDs. However, if the company does not perform well the investor is at risk of capital loss. While investing in this asset class doing your due diligence is crucial.
- Mutual Funds
A mutual fund is a shared investment where multiple investors invest in a company’s stocks or bonds. You can earn the highest possible returns at a lower risk. Every investor owns units, which is a share of the holdings of the fund. The income generated from this investment is distributed between the investors. The risk depends on the type of stocks or bonds that you choose to invest in.
Mutual funds are a good option for investors with all risk appetites. They have flexible tenures and high returns as it is a market-linked option. It is also a very convenient investment tool that does not require constant monitoring as the fund is managed by a professional fund manager.
Mutual funds are market-linked investment tools. By investing in these you face the potential risks of capital erosion. However, if you invest for longer tenures, you can minimise that risk as well. When the market performance is optimal, you can yield great returns from this avenue.