Written by : DG Gupta

A financial professional, qualified Chartered Accountants and Company Secretary examinations and enriched with experience of all types of accounting, taxation and compliance of Manufacturing as well as Service Industries

Few Important Financial Tips for Young Investors

DG Gupta
DG Gupta, CA, CS

Nov 11, 2021 00:53

Investing yearly is an effective way to increase your financial security in the long run. Unfortunately, most of our youngsters lack the practical knowledge and the life skills to manage money. Well, the culprit is our style of parenting! With inadequate opportunities to stretch their knowledge in finances, our young population are growing up totally clueless about the stock market. However, the truth is that if you are willing to learn, the world is open to limitless materials to boost your financial literacy. Moreover, in this article, we are going to be a crisp investigation of a few financial tips for young investors. Keep reading if you wish to earn some extra bucks.

Before getting into the topic let us take a sneak peek into the basic differences between savings and investing. Savings is a convenient and safer way to hoard some money. It brings you lower returns as you save only the money that you set aside from your earnings. However, investing brings you profit. Even though it is risky at times, it has the potential to fetch high returns.

1. Start with planning your finances

Build a financial background: Financial planning is crucial before you start investing. It is the first step that gets you closer to your goals of creating a corpus of wealth. Considering the attitudes of our youngsters today, most of them thrive under the consumerist attitude of the economy. Instead, you can leverage these spends and invest the rest of your finances in buying shares of your favourite brands. If you have the spark, then there are diverse industries to expand your financial landscape. Additionally, getting to know the realm of Mutual Funds NSE, Equity, BSE etc., will help you understand the stock industry better.

Keep a record of your finances: Before you start off, one of the vital financial tips for young investors is to know the avenue you are interested in and how much you will invest on a quarterly basis. But, the very idea of keeping a record of spending is excruciating for many. What we are suggesting is not to cut down all your expenses, but to invest small amounts without disturbing your current standard of living. If you think you cannot track the finances all by yourself, then you utilize finance planning applications or record your cash inflows and outflows in spreadsheets. These are long-run benefits that will empower your future with additional benefits.

2. Stick to your plans

Be constant: The success mantra for any goal in your life is consistency. Thus, if you are seeking financial tips for young investors, then unarguably we will suggest you adhere to your budget plans. This will prevent future debts and back you in case of emergency situations. Deviating from the budget can be risky especially when you are living in expensive Indian urban settings. You can keep the plan near sight as a reminder and this will help you set the goal for the immediate time being. On the other hand, this will also help you identify the surplus and additional resources.

Now that you have a plan you can divide your budget and start calculating how much you can save in future. You can start a savings account and save five to seven months of expenditure funds as your emergency fund. This will mitigate adverse financial struggles and help you survive even in medical emergencies. As you do not have liabilities or children at this stage, you can easily save the otherwise neglected amounts. Thus, in the end, you will have a surplus amount to live a relaxed life at retirement.

3. Start investing

Get to know the basics: With more than enough time, you can start exploring and studying the nuances of the stock market. There are plenty of materials available online and all you need is to find time to educate your knowledge about mutual funds and financial software. As per the devised plan, you can slowly commence investing in the business. But, be careful while dealing with taxability, liquidity and rudimentary assets. To avoid early reap, you can tally each investment to each goal. Apart from this, you can select equity-oriented merchandise for long-term goals and debt-based products for short-term needs.

Choose low-risk investments: Do not get much carried away with the investments. As you are dealing with money, you do not have to face any severe impacts at the early stage. So, an important financial tip for young investors is to do your calculation before arriving at a conclusion. Experts suggest that young people should invest more in stocks with long-run benefits. To make it more effective, start mastering self-control. Avoid impulsive buying and think thrice before you make up your mind. Low-risk investing is also essential when you are nearing your goal. Investors can shit from equities to low volatile debt products in the last few years of the investment.

4. Plan your tax

Taxing investments: Tax planning and account management are pivotal when it comes to financial tips for young investors. It is an essential component for successful financial handling. You can rearrange your cash flows, and claim the increments that you are entitled to in respective financial years. From this, you can calculate the taxable expenditure and the tax liabilities. Section 80C under the Income Tax Act 1961 in India allots deductions to young investors. Depending upon your tax regime you can unlock these benefits. If you are looking for a better grasp, you can learn about how returns will be taxed under the law.

As we have discussed, investment is an efficient alternative to attain a greater profit. Nevertheless, the uncertainty of investment can impact your financial welfare goal negatively. For instance, investment value can rise or fall in time. To avoid such situations, you can easily seek the consultation of professionals.

Kick-off your investments with Gotaxfile!

Gotaxfile is well versed in different financial tips for young investors. We will back you in any adverse circumstances by identifying the low-risk areas and taxable liabilities. You can also boost your investment by unlocking tax deductions and reductions. As the tax scenarios are constantly altering, our licensed specialists will keep an eye on the details that you might miss. In addition to that, our skilled experts can identify your potential profits and bring deductions by uncovering tax-free incomes. Whether you need long-term equitable funds or short-term debt-based funds, we assist with cutting-edge approaches to amplify your outcomes. Gotaxfile is a one-stop destination to get guidelines on investment and to reduce tax charges. Contact us to get a closer look!

DG Gupta
DG Gupta, CA, CS

Nov 11, 2021 00:53

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