Investment Ideas For Working Millennials

Create a financial plan

Financial planning is the first step towards achieving your financial goals. This will help in creating comprehensive money management strategy based on your life goals, cash flows and potential risk. This helps in providing a proper direction to your investments and ensuring appropriate resource allocation for achieving your life goals. Start by finding out the amount required for meeting each of your financial goals, the time horizon left to achieve them and the inflation rate. Once you know the size of your financial goals, take the help of SIP calculator to find out the monthly contributions required for achieving the financial corpus.

Consider appropriate asset allocation strategy

Asset allocation is the process of diversifying your investments across various asset classes like debt, gold, equities, fixed income securities, etc, according to your risk appetite and investment horizon of your financial goals. For example, as equities can be very volatile in the short and medium term, an investor with a moderate or low-risk appetite should stick to high-yield fixed deposits or short-term debt funds for goals maturing within 3 years as these instruments offer high degree of capital protection. Those with higher risk appetite can consider hybrid funds for their short and medium-term goals. Similarly, investment for long-term goals like retirement planning, child’s education/ marriage should be invested in equity mutual fund as equities outperform other asset classes and inflation over the long run by a wide margin.

Start investing early

The sooner you begin, the faster you reach your investment goal. Starting investments early also helps in instilling financial discipline and helps you benefit from the power of compounding. With the power of compounding, the gains generated from your investment start generating returns themselves, thereby earning exponentially higher returns over the long term. This is especially helpful in achieving large-ticket financial goals like generating corpuses for your post-retirement life and children’s higher education. For example, a 24-year-old would require a monthly SIP investment of Rs 1,400 at an assumed annualised return of 12% to build a corpus of Rs 1 crore by the time he turns 60. For a 38-year-old, building the same corpus at the same rate of return over the next 22 years would require a monthly SIP investment of Rs 7,800.

Avail credit card to build your credit score

A good credit score has become an important financial asset today. Lenders not only consider credit score while approving loan and credit card applications, they are also increasingly offering lower interest rates to those having higher credit scores. As there can be no credit score without a credit history, those lacking credit history can steadily build their credit score using credit cards for their daily expenses and ensure timely bill payment. Credit card transactions are reported to credit bureaus, which are then used to calculate your credit score. Those denied credit cards due to their inability to qualify various eligibility criteria can opt for secured credit cards to build their credit history.