How to invest in your 20s

If you are a college freshman this is a really interesting field that you should learn a lot about. You should start investing when you are 18 or as soon as you can. That’s what I have heard other people say. We’ll talk about How to invest in your 20s.

What are the tools that you need to use what are the things that you need to keep in mind? where can you invest all of these things we’ll be covering.

Let’s get started with investing. So first of all, you don’t need to do exactly what I’m telling you to do. Just understand this is what I feel a college student should be doing.

All right with that said let’s first of all talk about how to invest in your 20s. And why should you be investing and what type of investments are out there.

What is Compounding Investment?

let’s just discuss the concept of compounding.
Interestingly, the thing is this if you invest 100$ when you are at the age of let’s say 20s and by the time you retire at the age of let’s say 60 years or the span of 40 years, that 100$ ends up becoming around 450 times it’s current value.

So, 450 times what it is currently worth if you take into account about 10 percent interest rate compounding over 40 years that’s what you end up getting, that is a huge number and exactly if you do the same thing.

When you are at the age of 25 you have 35 working years left that will only amount to about 300 times.
It is an amazing way for you to grow the wealth over a while.

What is Security Fund?

let’s talk about a few things to do before you start investing first of all you need to have some sort of a security fund, okay well let me explain.

You need to make sure that you have the security fund with you right priority should be to grow this security fund. This should be about six months of your current monthly income.

So just make sure that you have at least that much amount in your bank account before going out to invest anywhere.

You know life is uncertain we don’t know what might happen tomorrow. So just make sure that you have that security fund with you.

Clear Your Debt

The next step is to clear your debt. If you’re a college student the biggest thing that you can do is to pay your college fees.

If you are doing freelancing or you are getting to do some internship, whatever you can earn you should always try to clear your debt first. Then once you have paid your college fees.

Ask Yourself A Few Questions

once you have the security fund with you now the next step would be to ask yourself a few questions,

• How much risk can you actually take and what is your risk appetite.

• what is your patience level are you patient enough or do you get influenced by hearing from the news or from hearing from your relatives or your friends that what is the best investment to make.

If that is the case then you should probably not invest in more risky assets because you must use your judgment.

• Can you invest for the long term right do you have this capacity to delay the gratification and to just wait patiently for the time to pass and the compounding to take its effect you need to ask these questions to yourself before you do anything else right.

Types Of Investments

Once you have asked yourself these questions now let’s talk about the you know the types of investments where can you actually invest.

we are all can you actually invest right, so let’s talk about this first of all let’s talk about the most secure ones, and then we’ll go to the more risky ones.

Fixed Deposit

Many people say that you should get yourself a fixed deposit from your first income or you should only invest in very secure assets. I don’t really believe that, I have a different mentality.

I believe that this is the time that you can take massive risk and if things won’t work out you would still be having a lot of time to start earning money again it’s important that you understand that.

But yeah that’s just my own personal point of view, you can have different perspective it’s completely all right.

Investment in Gold

Gold is seen as having a store of value that’s what people always resort to. Whenever there is some recession a lot of people see that the market is stumbling and they always go and invest as much as they can into gold. That’s one thing that you can invest in.

Investment in Mutual Funds

Mutual funds and index funds and then we have stocks and then we also have bitcoin. How to invest in all of these things where do you get started?

Before we get into the mutual fund, e need to understand few things about investing.

Now there are two methods that you can invest, there is something called passive investing, then you have active investing.

Active Investing

In active investing you are actively studying all of the businesses, you are putting in a lot of time you are reading their balance sheets and then you are making a calculated decision, that is called active investing. if you have the time, go ahead with it.

If you want to read some books to know more about it there’s an amazing book that is called “one up on wall street” by peter lynch, another book is “Dhandho Investor” by mohnish pabrai, those are amazing books they are available on YouTube as well if you want to listen to the audiobook version. take a look at those books.

What is Passive Investing?

This is what a lot of you will be doing. This is what will be the best option for most of you because we cannot be you know studying the market and the businesses that would be too much. Because we have other things to do, a lot of you are into coding a lot of you are into designing, freelancing, and all of that stuff.

So you need to do passive investing, what can you do for passive investing? Well, you can invest in stocks, if you are confident enough that you can do that.

What is Mutual Funds?

Mutual funds are a way for you to invest in a lot of companies like a basket of companies and this can be a great way for you to get started.

You can start investing with mutual funds if you are in college if you don’t know anything about the markets if you don’t want to spend the time to study about them, then do good research and shortlist great mutual funds.

But there’s a one really interesting thing that happens is that 80 percent of the actively managed mutual funds are not able to defeat the index funds that you have.

What is Index Funds?

Index funds are based on an index. what is an index well basically let’s say you have a Sensex index then you have a nifty 50 index. These are stock exchanges and the index is tracking exactly the growth of Sensex or for example nifty.

The best part about it is that it invests into the top 50 companies in case of nifty in the top 30 companies in the case of Sensex.

The best part about this is that these companies are too big to fail these are blue-chip companies these are the biggest companies in India.

So basically, when you invest into these index funds at the end of the day you are betting on the future of the economy, so you’re betting on the future of India.

What do you think the economy of India will be like? will we rise or will decline? That is for you to decide.

I believe that we will do a lot better in the future, so I invest in index funds.

How can I Invest in Mutual Funds? 

Now let’s talk about what application can you use if you want to start investing.

I use grow app for mutual funds and index funds. What I have experienced as a customer it was super simple to register and the verification process is super simple. You can download Grow app from here and start investing.

That’s what I use to invest in mutual funds and index funds, you can do the same.

How can I Invest in Stocks?

Now let’s talk about stocks. If you want to directly invest in stocks, then I think a great way for you to start with Angel Broking or Upstox. I use these two apps for investment in stocks.

You can download it from the below links:

Investment in SIP

You can start investing in sips, so what is SIP? Well basically you can think of it like this every single month you’ll invest some amount into that asset, that can be a stock or that can be like a mutual fund or an index fund and over time you would have invested a lot of money.

Just do that it automatically deducts the amount from the registered bank. That’s another great way for you to invest.

Just make sure that whatever income you have at first income goes off to the sip or to the investment that you’re doing and then you get the remaining portion. Now you know what happens when you invest in a sip. Also, you can look into dollar-cost averaging.

People have this question that how can you time the market, how can you find that perfect time, when the market is at a low and I can invest over there and you can reap the rewards afterward when it goes up.

Now the answer to that question is that you cannot predict where the market goes. You just don’t have the information, you’re not like some warren buffet or someone with a lot of information.

Dollar Cost Averaging

Just make sure that you do a sip and we call this Dollar-cost Averaging. What this means is that it doesn’t matterwhat the situation is of the StockMarket, you just invest every singlemonthand it averages out.

Let’s sayyou invest when the market is high, oryou invested unless the market is low,you invested less; the market is normal,then you invest over there as well.

What it does is that it averages out all the profits and the losses that you might have and it gives you a steady rate of return. Just keep this one thing in mind one more thing to keep in mind is that these index funds charge very low fees they charge about 0.1 percent.

I think it is amazing if you look at some actively managed funds, they will charge you a lot more, they’ll be charging fees depending on how big is the mutual fund and how big is the asset under their management.

It ranges between 0.5 to 1.5 as well percent actually of the total gains that you have. That’s just something to keep in mind while investing in funds.

You must understand these terms exit load, P by E ratio. If you want to know more about it, watch the videos of CA Rachana Phadke Ranade. She makes some amazing videos on the stock market.

Another Youtuber that you can follow is going to be Pranjal Kamra from phenology. He makes some amazing videos as well, so just search on YouTube you’ll get some amazing videos and you’ll get to learn a lot.

What is a Cryptocurrency

let’s talk about bitcoin, so bitcoin is risky right now right because it is a lot more volatile. If you get influenced by the daily fluctuations of an asset, then you should not be investing in bitcoin. The way it works is that, let’s say in the morning it is at 30 lakh rupees tomorrow or by tonight it can be like 23 lakh rupees.

So that fluctuation can just play with your mind in a way. Maybe you can be like oh my god my money just got reduced by 10 or 20 in just one day I want to get out of this!

I mean if you can put in the money and you can just forget about it then go ahead with bitcoin. But before you do that, I would say that you need to research a lot about what is a cryptocurrency, what is Altcoins, how can you invest in them.

How to Invest in Bitcoin?

I use these applications called Wazirx and Coinswitch. If you want to invest in bitcoin.

This is a crypto exchange in India where you can invest in these cryptocurrencies and you can buy and sell.

You can just invest a particular sum of your money into Wazirx and that way you can start buying all of those cryptos that you are interested in.

I would recommend you to only get Bitcoin or Ethereum, I invest in Ethereum. But make sure that you research properly.

Do a proper research

Don’t listen to the news, don’t listen to what I am saying, watch some videos that are from people that know what cryptocurrencies are and how they work.

Read some books you can also read the white paper of bitcoin and Ethereum you will get to learn a few things from over there as well.

Just keep this one thing in mind, if you’re investing in bitcoin, it can have a huge gain for you, and if the volatility bothers you should not invest in bitcoin.

Invest Directly into US Companies

Now another way you can also start investing directly in US companies. Well, you can get this application called vested. With that application, you can start investing in US stocks.

It is a very simple process, just complete your KYC verification process and once that is completed, you can start. Even buying fractional shares of foreign multinational companies and that’s interesting.

For example, you can get the share of tesla you can get apple whatever companies you are a fan of you can buy their shares.

These are how you can start investing whatever money you are earning. I know right now it might not be like a lot of money, but whatever you have, I think you should start investing.

Things To Keep in Mind

One more thing to keep in mind is that is yes, these things are risky but make sure that you research them properly.

Read a lot of books, watch a lot of videos from people that know stuff and that’s you’ll get better with it.

A few more things to keep in mind is how taxes work, learn about what taxes learn about the fees that these uh mutual funds and index funds charge you.

Learn about what is LTCG (long-term capital gains) are short-term capital gains.

Conclusion

One more thing that you might think is, should I do day trading? I don’t do that because I don’t have the time. I don’t have the power to keep thinking about when you should invest, where should I take out, I don’t do any of that stuff.

I invest for the long term, That’s what you should do if you are in college or if you are a student.