Winning Bizness Desk

Mumbai. In your 20s and early 30s, investing might not seem urgent. With student loans, travel plans, and lifestyle spending taking priority, the idea of investing is often sidelined. But delaying investments means losing valuable years of compounding. Even small monthly investments started early can grow significantly over time. Experts suggest beginning with whatever amount is affordable, like Rs 500 or Rs 1,000 per month via SIPs, and gradually increasing it as income rises. The earlier you start, the more your money grows.

Many young investors get lured into high-risk options, hoping for fast returns. But aggressive investing without research is no better than gambling. Market volatility can quickly turn gains into losses. A better approach is building a strong foundation through mutual funds, index funds, or stable stocks. If one wants to experiment with riskier assets, it should be done with a small portion of the portfolio — ideally not more than 5%.

Lack of Diversification and Clarity

Putting all your money into one asset class — be it only stocks, gold, real estate, or cryptocurrency — increases risk significantly. A downturn in any one category can hit your entire portfolio. Another frequent mistake is investing without clear financial goals. Investing should be linked to objectives like home purchase, children’s education, or retirement. Categorising goals by time frame — short, medium, and long-term — helps in selecting the right investment products and sticking with the plan.

Tax Neglect and Emergency Planning

Many ignore the tax implications of their investments. For instance, short-term gains on stocks are taxed at 20%, and even long-term capital gains over Rs 1.25 lakh attract a 12.5% tax. Familiarity with tax-saving instruments like ELSS under Section 80C is important, especially under the old tax regime. Another mistake is skipping an emergency fund. Unforeseen expenses like medical bills or job loss can force premature withdrawal of investments, often during market lows. Keeping 3–6 months of expenses in a liquid fund or sweep-in FD is a must.

Bad Advice and Lost Confidence

In today’s digital age, there’s no shortage of financial advice — some useful, some harmful. Blindly following friends, social media influencers, or trends can lead to poor decisions. It’s essential to align investments with personal goals, risk appetite, and life circumstances. Many also believe it's too late to start investing in their 30s, but that’s far from true. With consistent planning, even a late start can lead to strong wealth accumulation.

Review Often, Invest in Yourself Too

Set-it-and-forget-it may sound good, but your financial goals and risk profile can change over time. Reviewing investments once or twice a year ensures you remain on track. Adjustments may be needed as life progresses. Lastly, investing isn’t just about money. Spending on self-improvement — skills, courses, fitness — often yields the best returns. Your ability to earn and grow is your greatest asset, especially in your 20s and 30s.

Entire Story in a Nutshell

• Start investing early, even small amounts can grow big over time.
• Avoid high-risk traps promising fast profits — they rarely end well.
• Diversify your portfolio to reduce risk and improve returns.
• Invest with clear goals, not randomly or under peer pressure.
• Understand tax implications and use tax-saving tools wisely.
• Build an emergency fund before chasing high returns.
• Review regularly and invest in yourself- your skills are your best investment.