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Best Investment Options for Young Adults in India

The major workforce in India comprises young adults. Keeping their investment requirements in mind, an array of best investment options for young adults in India has emerged in the market. Considering age is to the advantage, several long-term investment ideas for young people have been developed.

It is important for young adults to have a grip over their finances in order to be ready to shoulder family responsibilities while also ensuring they accumulate enough funds to meet their long-term financial goals. Continue to read the article for investment strategies for millennials and information about affordable investment opportunities for youth.

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Best Investment Options for Young Adults in India

What are the Best Investment Options for Young Adults?

Best Investment Options for Young Adults in India
October 23, 2024

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What are the Best Investment Options for Young Adults?

Starting investing in your 20s will help in building wealth early in life. With an array of investment tools available in the market, choosing the right one may be challenging. It, however, depends on your financial goals and requirements. Here are some beginner investment options you can consider.

Fixed Deposit (FD)

At 20, you may need to gain an understanding of market trends and investment skills. You may wonder how to invest in your 20s with minimum or no knowledge about the available investment options.

A fixed deposit account is one of the best investment accounts for young adults. This  one-time investment plan can last for a period of anywhere between 6 months to 10 years, depending on the investor’s needs. Funds in fixed deposits are easily accessible in times of emergencies.

  • ULIPs (Unit Linked Insurance Plans)

In this policy, the investment risks in the investment portfolio is borne by the policyholder  

Saving and investing for millennials can be a daunting task, especially for those with no clue about market trends. Unit-linked insurance plans are among the best investment options for young adults in India as they have both investment and life insurance components. ULIPs allow policyholders to invest in various market-linked funds like equity, debt, and balanced funds.

The returns are based on market performance and are not fixed like in fixed deposits. ULIP is considered as one of the most diversified investment options for young investors. The flexibility to switch between funds is another unique feature of this investment tool. The other advantage is the life cover that provides financial security to the policyholder’s family.

  • Recurring Deposit Account (RD)

A recurring deposit account can be one of the best investment options for young adults in India who opt for systematic savings. With no uncertainties like in the stock market or the need for a lump sum investment, the recurring deposit is the best investment for young investors. It inculcates a disciplined saving habit and provides stable returns like fixed deposits. A recurring deposit is a great way for young investors to plan for short-term financial goals. This scheme benefits both novices, as well as, hard-core investors.

  • Public Provident Fund (PPF)

The Public Provident Fund (PPF) is a government-backed tool ideal for long-term investment. It is ideal for financial planning for young adults. Capital protection and guaranteed returns make PPF a low-risk investment for young adults. Apart from fetching a high interest rate, it is one of the best tax-saving investment tools.

One of the best investment tips for young adults is to start saving in PPF early in life and derive the tax benefit provided under Section 80C of the Income Tax Act 19611. The interest that you earn, along with the maturity proceeds, is also tax-free. This makes PPF a perfect investment option for those looking for smart investments for early career professionals.  Further, a 15-year lock-in period helps in creating a substantial corpus for a stress-free financial future.

  • Mutual Funds

Mutual funds combine contributions from various investors and invest in the market. The flexibility to enjoy a diversified portfolio, along with the potential for getting high returns, make it one of the best investment options for young adults. Choosing funds that align with their risk appetite and time horizon is one investment advice for young professionals who intend to play safe. For instance, equity funds suit long-term goals and provide higher returns, whereas debt funds are for stability.

Systematic Investment Plans (SIPs) are also a way to invest in mutual funds and serve as great investment plans for young adults who wish to start small and prefer consistent wealth growth over time.

  • ETFs

Exchange Traded Funds (ETFs) are one of the best investment options for young adults in India, especially for those interested in diversifying their investment portfolio. ETFs are the perfect combination of the best features of both mutual funds and stocks. Low-cost, easy trading and diversification make ETFs the best investments for young investors. They allow young adults to invest in a variety of assets like bonds or stocks, and they provide the liquidity many of them are looking for.

Investing in ETFs gives exposure to different markets and sectors offering high-yield investments for young adults. The low expense ratio is an important factor in personal finance for young adults who intend to minimise costs, which is one of the key features of ETFs. However, for those planning for their financial goals or starting a retirement fund early, comparing ETFs with other investment options is crucial for an informed decision.

  • Short-Term Bond Funds

Short-term bond funds are also mutual funds that invest specifically in government securities, deposit certificates, and commercial papers. With the advantage of easy liquidation, similar to a fixed deposit, short-term bond funds are the best investment options for young adults in India.

Since these funds invest in bonds with shorter maturity periods, they are considered low-risk investments for young adults who prefer safety over volatility.  A short-term bond fund offers moderate returns with minimal risk, and so is an ideal investment plan for young adults.  

Conclusion

The best investment options for young adults in India are a combination of low-risk and high-yield plans. PPFs are good retirement plans with stable returns, while mutual funds and ETFs are long term investment options with high returns. Other growth investments for millennials are equity, stocks, bonds, etc., which enable wealth creation, while other low-risk options like PPF, NPS, Fixed Deposits, etc., ensure financial security. Keeping a balance between these options depending on the risk tolerance and time horizon is among the noteworthy young adult investment tips for millennials.

FAQs on Investment Options for Young Adults

Q. What is the best investment for young people?

The best investment options for young adults in India depend on their risk tolerance and financial goals. ETFs, stocks listed on the Stock Exchange, mutual funds, etc, are long-term investments with high returns. Other investment options for safety and stability are PPFs, NPS, Fixed Deposits, etc.

Q. What are good investments in your 20s?

Good investments in your 20s means maintaining a balance between risk and growth potential. The various options are fixed deposits, PPFs, NPS, Mutual Funds, ETFs, Short Term Bonds, etc.

Q. What are the tax benefits associated with investment plans for young adults?

Investment plans for young adults like PPFs, NPS, Mutual Funds, Tax Saver Fixed Deposits, etc. provide tax benefits under Section 80C of the Income Tax Act 19611.

Q. How should young adults balance short-term and long-term investments?

Young adults should create a financial budget and allocate the funds between short-term and long-term investment tools. A budget makes managing funds simple.

Q. How can young adults start investing with a limited budget?

To begin with, young adults should start small and invest in Systematic Investment Plans that grow over time. They should also consider ETFs that give exposure to diverse markets and sectors with minimal cost, and start using micro-investing apps that permit small contributions to various assets.

Related Articles-

Safest Investment Options 2024

10 Types of Investments in India and How they work

The Ideal Investment Plan for the 30-Year-Old Who Wants to Buy a Home

Reference links:

https://cleartax.in/s/investing-in-your-20s

https://www.investopedia.com/how-to-invest-in-your-20s-8620961

https://www.investopedia.com/articles/younginvestors/12/best-investments-for-young-people.asp

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Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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