The Early Investor- Part 1 of the “Personal Finance For Starters” Series
- For longer-term goals, they should have ideally a 75 percent exposure towards equities for longer-term capital appreciation and a 25 percent exposure towards Debt investments.
- Equity investments could be contemplated through a mix of passive index funds, basket of few large and midcaps mutual funds
- Debt portion could be deployed through appropriate debt mutual fund schemes, corporate deposits
But what exactly is personal finance?
Simply put, personal finance is the process of planning and managing your financial activities such as investments, spendings, savings, etc. It also involves protecting yourself financially against any unforeseen circumstances such as windfall losses or a medical emergency for instance by making provisions.
According to a study titled ‘Financial Planning Preferences of Young Indians,’ the youth at present are more aware of the concept of personal finance than the generation before them. At present, India has about 50 percent of its population under the age of 25 years. This age bracket who has just completed their education and are relatively new in the employment sector have just started receiving an income, and have taken over a few financial responsibilities on their shoulders. These could include contributing to household expenses, paying rent, funding expenses while living away from home, etc.
With a fresh inflow of money every month and surmounting expenses, it is important to plan your finances not only for the present, but also for the future in terms of savings and investments. So, if you fall in this age group, where have you reached in the process of figuring out your finances?
Managing your income and expenses can seem like a daunting task just when you enter the workforce, but the earlier you begin, the better returns you reap over time.
So, how must people who have just received their pay-cheque begin to navigate their finances?
The Guiding Voice: Here’s what experts say
Speaking on the current market scenario, he added, “They should use the current fall and volatile markets to accumulate sound blue-chip companies which would help them get compounding returns over the longer term and help beat inflation.”
Fledgling investors are eager to learn about ways to invest, and are relying on various sources of guidance for the same.
Talking about investing in new age digital asset classes, she said, “I feel like cryptocurrencies are too risky for me to invest in. The world is still trying to figure out how to use crypto as a medium of exchange, and given the current volatility in the crypto space, I’d prefer to stay away from it.”
While personal finance is broadly subjective, it is a road that must be taken by everyone. The earlier they traverse down this road in their lives, the better it is for long term returns.