The feeling that we experience when we secure our very first job and the first salary cannot be expressed in words. This feeling of being elated is accompanied by another feeling – how to spend our first earnings? Do we splurge it on luxuries? Do we save it by keeping it stagnant in the salary account? Or do we invest it wisely? Definitely, the best option of these three is to invest part of your salary wisely. The term “investment” is vast and as a beginner, it can be quite confusing to decide on which is the best investment option. In this article, we will go through some of the options that could be considered when you get your first salary.
The first thing that one can do is to start a Systematic Investment Plan (SIP) in a good Mutual fund scheme. There are plenty of fund houses and an array of schemes to choose from, based on your earnings, risk tolerance levels, age group, financial goals, etc. Once these factors are considered, conduct proper research on some of the best schemes being offered by the top fund houses. You can start an investment in a SIP at as low as Rs. 500, and can increase it whenever your earnings increase. Also, a lot of schemes offer tax-saving benefits in addition to wealth creation. It is advised to begin SIP’s than keep your funds idle in bank accounts.
This is probably one of the safest investment options that anyone would opt for. It is ideal for those who are risk-averse. In the earlier years, FD’s offered good interest rates in contrast to what other investment options could offer. However, times have changed, and the interest rates at present aren’t quite attractive; ranging between 5-6.75%. However, it is still a good option, to begin with, and put in a portion of your savings here, in case you have a low risk appetite.
This is an interesting scheme offered by the Government of India that also offers an attractive interest rate in contrast to a few other safe investment options. In addition to this, it also offers tax-saving benefits as the amount you deposit in a year can be claimed u/s 80c (up to the limit of Rs.1.5 lacs). This minimum amount of investment is Rs.500 and the maximum is Rs.1.5lac. Any amount above Rs.1.5 lac invested in a year will not be eligible for interest income. This is another safe investment option and is worth considering.
When you are young, the first thing that you must consider investing in is Health insurance and Life insurance. You must opt for a plan that will protect you from any health emergencies and the cost involved. The benefit of investing early in insurance is that you could get a good cover at a low premium. Many youngsters skip this investment option, thinking it won’t be necessary. However, considering the stress levels that everyone faces these days, insurance is highly recommended.
Emergency funds are never thought of, be it when you get your first job or even at a later stage. The recent pandemic has been the perfect example of why one must have reserves in form of an emergency fund to meet any unexpected crises. The pandemic has created a lot of chaos in terms of loss of employment, sudden health issues, unexpected expenditure, etc. This has definitely taught us to ensure we start keeping aside a part of our income in an emergency fund to meet such unforeseen events. It is advisable to have an amount that equals at least 6 months of your income as an emergency fund and you can keep increasing this fund with time.
Though this might appear to be a risky venture, you could definitely start by studying the market conditions and begin with small investments, as the returns are quite high when the stakes are high. If you are risk-averse, you could start investing in some of the top companies with a long-term perspective in mind, as these are bound to give you the desired returns. However, in times of unlikely events, when there is a market crash or a minor fall in the stocks, one must not panic and be patient. It is advised to invest just a small portion into good stocks that will rebound even after a crash. But, remember not to act on random tips; instead, research the areas you intend to invest in prior to your investment.
To sum it up, once you get your first job and your first salary, start by budgeting. Create your statement of income and expenses and get an understanding of the savings you have in hand. Once this step is complete, you could get in touch with a financial expert as well who will analyze your risk appetite and look into various other factors before recommending the investment options for you. Always remember, the right time to invest is to begin as early as possible! Good luck!
(The author is Co-Founder & CEO, Moneyfront; views expressed are personal)
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