As we all know what is an investment; investment is the process o employing of excess money to earn returns. It is very important to invest so that one can get financial freedom at a very early stage. Nowadays every person who is in his/her twenties is always confused about how he/she could invest or utilize his/her earned money in the right way.
So if you are at an early age that means in your twenties then it is very important to invest as soon as you can in a cleverly planned strategy. Now let us discuss the golden strategy of investment; so that you can understand the investment process that you should undertake as soon as possible so that you get financial freedom.
1. Think before taking a loan in your twenties.
If you are in your twenties you should not take loans or if you take then think about it twice.
If you take a loan you get bound by a trap; still, an education loan is acceptable because at some point in your life it can be necessary but taking the loan in your name, not in your parent’s name, a good thing is that an education loan comes in a low-interest rate.
But some loans you should not take are personal loans, and vehicles on EMI if necessary take a small vehicle at EMI if your income is good enough to pay it out. So the main thing is that you should reduce and eliminate loans in your twenties.
2. Insurance.
Insurance is the most important thing that you should have because Insurance is essentially the way that you are preventing or planning for something that is unforeseen.
Anything can happen life is uncertain; so I recommend only two types of insurance and only two types of insurance are there. First Life Insurance and second Health Insurance.
In Life Insurance I recommend you should take Term Life Insurance, you should not take any other form of plan Life Insurance like an Endowment Plan, Maturity Plan, etc; in this type of plan, you will not get a large cover as compared to Term Life Insurance.
If you are a salaried person and want to know what your cover should be then 20 to 25 times your yearly salary is your good cover. For example, if your yearly income is 5 lakhs, you can take a term life cover of 1.25cr which is 25 times 5 lakhs.
And if you are young and you are in your twenties you have the advantage is that you can get this Insurance Term Plan at a very low rate at just 6000rs to 7000rs per year which is only 500rs per month which is the best investment.
Health Insurance is a must for everyone; you, your parents, your wife/husband, your children everyone should have life insurance.
If you work in a corporate that you have Corporate Life Insurance for you and your family, just ensure that every member in your family gets a 1lakh of coverage. If any company does not provide you with any insurance then you have to take it on your own.
No loans or minimum loans and Life Insurance that is when you are ready to Invest.
3. Investment.
When you are in your twenties the best thing is that you are earning a small amount in your early earnings, so most of your tax liability is very low, you are paying a low tax or some people are below the tax slab which means no tax is to pay.
This means that the income that you are earning in hand will be very high in the team percentage, which means you have the full potential to invest your income as much as you can.
4. What is the right investment ratio?
The income that you earn in hand in a month from that income minimum of 20% you have to Invest. For example, if you earn 50 thousand a month that is 10 thousand which is 20% of the 50 Thousand you should Invest.
In your twenties, no one expects that you are rich because you have just started earning so why don’t you use it as an advantage, live simple life so that you look poor, and don’t buy expensive phones, clothes, or vehicles; even you should not go to costly restaurants to eat because it is not necessary.
If you think that the twenties are the peak youth of your life you should enjoy but because of it, you are destroying your financial freedom for the rest of your life. In your twenties, you should live far below your means and invest as must as you can in a disciplined way minimum of only 20% or as much as you can; then you will have strong financial stability.
5. What should be the Investment Ratio?
Suppose you have started investing today up to the age of 65 which is your retirement then how much do you have to invest every month so that you can get retired with 1cr of money at today’s value not at your 65 age at present?
It means if you are 20 years and you invest every month till the age of 65 and want to retire with 1cr and the inflation rate is 5%, then how much do you have to invest every month, only 2000rs every month do you have to invest and by the end of the time you will have 1cr rs of today’s value.
And let’s assume that the return on your investment is 10% every year then you will have 3.5cr at the age of 65, this is the power of compounding.
Now just assume that if you can invest 3000rs instead of 2000rs or 5000rs instead of 3000rs then it will just change the equation. But if you start investing at the age of 30 then you will end up with only 50lakh of present value, so start investing as fast as you can because time is the most valuable thing in investment.
6. Where to invest.
If you are in your twenties then you should not invest in FDs, not at all, you have to invest in stocks of a company, you just buy and hold, because your vision is for 45 yrs within which the market will go up and down, up and down but eventually it will grow and you will earn handsome returns.
Gold is also a good option because gold is giving a continuous return of 10% every year. And if you don’t have the knowledge of stocks then simply invest in Mutual Funds which are equity-based because these funds are managed by professional individuals.
7. What should be your portfolio?
Now, what should your portfolio look like, it does not matter how much you invest your portfolio should have, 30% of your investment invested in Direct Stocks of the Top Companys in the industry, around 40% in portfolio stocks which includes a small case or mutual funds wherever your preferences and go for high risk and high return.
What you can afford in your twenties as the stocks will go down and up very fast but over 45yrs it will go up and you will get a very good return, 20% in gold which is a stable asset, and grow at a very slow and good rate with less inflation and you should invest gold by investing in Gold Bonds and the remaining in cryptocurrency as it has some potential which will be valuable in future.
