What Should Millennials Invest In?
- In such tragic and adverse situations, every human being, whether he is an adolescent, early adult, middle adult, or late adult, has understood the importance and gravity of savings and the channelisation of the same into high-return investments.
- Even the happy-go-lucky millennials who believe in living their life to the fullest must now acknowledge that first, one must secure the future by making appropriate investments at the right time and the right place.
- Later you may spend on peripheral expenses.
- In the Deloitte 2020 Millennial Survey, it was found that 80% of the millennial respondents agreed on having stress about their financial status.
- A report suggests that millennials are more attracted to market-related schemes for investments as it serves as an ideal combination of tax-savings and good returns.
- They tend to create a diversified investment portfolio, for which they plan to start investing right from the age of 25 to 30.
- Millennials account for almost half of the current Indian population and about 47% of the Indian working sector.
- Millennials generally have an aggressive investment attitude and favour self-directed investment schemes as they are tech-savvy, digitally sound, well-educated, and socially active.
- Following a quote by Benjamin Franklin that says, "An investment in knowledge pays the best interest,” we have designed a list of some incredible investment ideas for our energetic and enthusiastic millennials.
- It will help them gain optimum financial knowledge and investment opportunities according to their earning ability and investment corpus, risk-taking capacity, and retention period.
- So, read below to find what those ideas are and start investing.
Finest Investment Ideas that Our Millennials would surely Invest In
Mutual Funds by way of Systematic Investment Plan (SIP)
- Investment in mutual funds via SIP is the most preferred and safest option for millennials.
- SIP is a high yielding, negligible risk investment plan where a fixed amount is automatically debited every month from the investor’s linked savings account, which goes into the mutual fund SIP investment portfolio chosen by the investor.
- SIPs offer a diversified and mixed investment portfolio as it invests the investor's sayings both in equity and debt market to maximise the return and minimise the risk appetite.
- It caters to almost all types of investors by providing a customised portfolio according to each investor's risk-bearing capacity.
- Because of the compounding effect in SIP, investors can build rampant wealth even with the smallest monthly investment of Rs. 500.
- A survey states that about 85% of millennials in India have a SIP Mutual Fund investment already running.
- SIP investment is beneficial only if it is started at an early age and is locked for a longer period, making it a hot option for the millennials.
Tax Savings Fixed Deposits
- Fixed deposits are the most trustworthy and highly returnable tax-saving investment instrument since starting the banking system.
- Fixed deposits are safe and completely risk-free, transferring investor's tension upon the bank in which it is deposited.
- Tax savings fixed deposits are attractive to millennials since they can claim deductions under Section 80C of the Income Tax Act and earn lucrative income because of the higher interest rate.
- Here, the investor has to invest for a minimum period of five years.
- A maximum of Rs. 1.5 lakh can be claimed as a deduction under Section 80C if invested in tax-saving fixed deposits.
National Pension System (NPS)
- The National Pension System or NPS is a 100% government initiated investment plan that offers a blend of bonds, equity, liquid funds, and FDs.
- Any subscriber to NPS is free to choose or fix their preferred allocation of money to the different asset classes.
- There are two types of accounts, namely Tier 1 and Tier 2, offered under the NPS scheme.
- The Tier 1 NPS account is entirely a pension account, and the Tier 2 NPS account is an investment account, which is a voluntary saving account linked with the PRAN.
- The benefit of investing in Tier 1 - pension accounts is that the investors can reap income tax benefits.
- If you invest in NPS, you can easily claim a deduction of up to Rs. 1.5 lakh under Section 80C along with an additional deduction of Rs. 50,000 under Section 80 CCD (1B).
Public Provident Fund (PPF)
- PPF is another great investment idea from a long-term perspective.
- Just like fixed deposits, PPF offers an exponential income growth because of its high rate of interest and at the same time yields tax-saving benefits.
- With a compounding interest income and a minimum lock-in period of 15 years (which can be increased after completion of the first five years), PPF can result in an enormous amount of wealth in the long run.
- All investments made in PPF enjoy 100% "Exempt" tax status where the maturity amount and the total interest amount earned during the investment tenure are free of any tax obligations.
- A maximum of Rs. 1.5 lakh can be invested in the PPF account annually.
Unit Linked Insurance Plan(ULIP)
- Available as a life insurance product, ULIP offers dual benefits at the cost of one.
- Primarily, ULIP offers risk cover for the investor who is getting insured, and secondarily, it also provides him with an investment option.
- Under the ULIP plan, one half of the money is directed towards bonds, stocks, and similar other assets.
- Simultaneously, the remaining half is invested as life insurance to provide life cover to the insured.
- Upon maturity, the policy’s investment portion is given to the ULIP policyholders that account for exemption under Section 10(10D).
- ULIP investments are also eligible for a deduction limit of Rs. 1.5 lakh under Section 80C, which can help millennials excavate more tax benefits.
- The portfolio returns under ULIPs can rise by 200-250 BPS.
- Real estate may be the most expensive investment idea for millennials and the safest and most promising investment plan.
- The real estate sector is the only sector that can never go into recession, seeing the population rate’s uncurbed surge.
- Rather than giving a large chunk of your income as rent, it is better to slowly accumulate the money and buy an apartment.
- Ensure it is within your budget. You will happily live according to your terms and wishes.
- Investment in real estate presents the investor with a dual-income earning opportunity by letting out his property on rent and earning a handsome rental income.
- Accidents and misfortunes come uninvited with no warning bells.
- Therefore, investing in oneself and our loved ones' health is a must to live stress and worry-free.
- The older millennials look towards health insurance as a financial safety for themselves and their family in medical emergencies.
- The younger millennials see health insurance more as a tax benefit (as a deduction under Section 80D on the premiums) than a medical aid at the time of contingency.
- Only 35% of older millennials and 27% of younger millennials have insured their health with a health insurance policy.
Mutual Fund via Equity Linked Savings Scheme (ELSS)
- For millennials, the best way to start their investment journey in the mutual fund sector is through investing in tax-exempt ELSS plans.
- Amongst other tax-savings channels of investment ideas, such as education loans, home loans, etc., ELSS is the most lucrative and high yielding tax-savings investment scheme.
- ELSS is mostly opted for by working professionals who are willing to take the risk.
- This investment option is a high-risk investment plan as it invests in diversified equity mutual funds.
- Here, investors can also take a deduction of up to Rs.1.5 lakh under Section 80C.
- Investors need to invest their money for a minimum of 3 years, and you can expect a 20% return (seeing the past trends) from an ELSS investment scheme.
- A normal bank or post-office savings account serves as a great investment opportunity for millennials if they have a good chunk of liquid money that isn't useful to them soon.
- A bank/post office savings account is an excellent means to earn sufficient interest income eligible for tax benefits under the Income Tax Act.
Cryptocurrencies And Gold
- Who does not love gold and silver metals and precious stones, which are also seen as a status symbol in society?
- Investing in such precious stones and metals would lead to a generation of wealth that grows in the future with high ROI.
- You can easily sell liquid wealth as these metals in the market.
- Lately, dealing in virtual currencies popularly called "Cryptocurrencies" is also a hot investment option for millennials.
- It offers a much higher return than the above mentioned-investment ideas while carefully balancing the risks involved.
- Hence, the above-stated investment ideas are undoubtedly the most popular and most preferred investment plans for our millennials who do not like to compromise their lifestyle and their wishes for anything.
- So, if you want to continue the lavish and fantastic life of yours without causing any monetary deficiency, invest in one or more of the investment mentioned above schemes and live your big fat happy life.
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Q- Why should millennials start investing from an early age?
- Millennials should start investing right after their graduation year, i.e., around the age of 21.
- Investing early would make them understand the pattern of financial independence and discipline and at the same time inculcate the habit of savings in them.
- Apart from this, the early investment would allow more recovery time, improve their risk-taking ability, improve the time value of money, support their retirement plans, become a lender, and more.
Q- If I want to buy a house before age 30, how should I plan my investments?
- Let's consider a hypothetical situation where you want to buy a flat costing Rs. 50 lacs.
- Now, seeing your bank statements and income tax returns, any bank would easily give you an Rs loan.
- Forty lacs, which means you have to accumulate a total sum of Rs. 10 lacs.
- Therefore, investing Rs 15,000 by starting a SIP in a large-cap mutual fund is recommended as a return of 16% on a CAGR basis can be expected.
- Approximately in 4 years, this investment of yours would be equal to Rs. 12 lacs.
- It is advisable to invest a higher amount to match the inflation rate because a house’s cost may increase when you finally decide to buy a home.
Q- How should a millennial plan his investments?
- Every investment that a person makes must be goal-oriented, i.e., fulfil his purpose/objective behind investment or his needs and fit his profile.
- A millennial should start choosing his investment options after conducting detailed and adequate research.
- They should be cautious about the quick money minting schemes that lure young professionals through its false high returns promises in a short period.
- Periodically, they must review their mutual fund and stocks portfolio.
- Understanding of tax implications on the returns they earn is necessary.
Q- Where and how to invest if you're a newlywed millennial about becoming a parent?
- In this case, investing in both Growth Assets and Defensive Assets is considered a good investment strategy.
- Growth assets include alternative investments, property, and shares.
- Such assets involve higher risk levels with the potential to offer higher returns in the long run.
- On the other hand, Defensive assets mean cash and fixed interest that are comparatively lower in risk and deliver lower returns in the long run.
- You need to consider children’s long-term financial goals, like education, assets are a profitable option due to their better returns.
Q- Which option is better - a family floater health plan or an individual policy plan?
- In a family floater health plan, the overall sum insured covers all the family members that are covered in the policy.
- Simultaneously, the sum insured under individual health policy covers only one member who is insured under the policy.
- A family floater health plan has only one disadvantage.
- If any one of the insured members surrenders the policy and claims the money, the rest of the members have no coverage and are left uncovered.
- This is not the case under individual health policy as the single person insured is only entitled to enjoy the policy benefits.
- In the former policy, the cover is much higher.