5 investment tips for first-time earners

You're young, you've only just started enjoying the benefits of monthly income and you're contemplating about investments – partly for pure investment but mostly for tax saving purposed. Here's are five things you need to keep in mind

1. Start ASAP

The ideal time to start investing is as soon as your first salary is credited in your bank account. The idea being that you should start as early as you can and not around the time you are required to declare your investments and/or file returns. More often than not, fresh graduates don't have a pay package that falls under the taxable category. This however does not mean that you don't invest. In fact, this is the best time to put aside some money in mutual funds. In fact, SIPs (Systematic Investment Plans) are a good option for you. And since, you don't have the pressure of investing to save tax, you can knock yourself out with some aggressive investing.

 

2. Outline a goal

What are you investing for? Is it simply a means to save money? Are you saving up for a house or car? Saving for future education or marriage or perhaps even a trip abroad. The point is, before you start investing, you need to figure out exactly what that investment will help you achieve. So, if you are investing to fund your higher education – that automatically, times the duration of the investment, which will be maximum 2-3 years. You will therefore, then look at investment options that can guarantee you returns within 2 years or so. So, your options could be mutual funds, perhaps SIPs, maybe even stocks. It is however advisable to get professional help on choosing the stock you want to invest in.

 

3. Portfolio management

While it's still early days and you're only getting started, you will still need to establish the debt-equity ratio of your investments. Simply put, debt investments include PPF, NSC, Life insurance policies

, etc and equity investments include mutual funds, stocks, etc. i.e. equity investment returns are subject to stock market fluctuations. It's true that the best time to take risks is when you're young and relatively free of liabilities. However, you shouldn't have an investment portfolio where all your money is invested in equities and none in a PPF or NSC. The ideal investment ratio to build wealth in the long term is a 60-40 equity/debt ratio. You can, in the beginning, subject to market conditions, even look at an 80-20 ratio (80 percent equity, 20 percent debt). In any event, you should have some debt investments as these guarantee steady returns at all times.

 

4. Seek help

When it comes to investing, don't be shy to ask for help and most importantly talk to peers and sub-ordinates. This will give you a perspective on what others are investing upon. When it comes to Mutual fund investment, get whoever is selling it to you, to give you details about the fund – its performance, NAV, the fund house, etc. Also, do your own research. This way, you know what questions to ask.

 

Also, if you are looking at buying insurance, look at a traditional insurance policy first. Once that's done, then look at ULIPs. In any event, don't invest on hearsay, seek help from professionals and do your own research

 

5. Real estate

This is one investment that is worthwhile, economy and market conditions notwithstanding. Yes, you have only started earning, and cannot possible afford the loan for a house. But you should aim to invest in property – be it an apartment you want to live in or maybe just for investment purposes. One way of going about this is that, you invest in equity for a couple of years, save up some money. This way, when your income can support a home loan

EMI you have saved enough to pay the balance money for the house, not covered by the home loan (home loans offered are generally 80 percent of the total value of the house).

 
There you go, five easy steps to remember when you start investing for the first time.

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