Yearly Archives: 2024

The millennial generation faces particular financial concerns that can often feel overwhelming in today’s fast-paced and constantly changing environment. It is easy for young millennials to forget the value of investing in the rush to succeed in this fast-paced environment. Even if young adults are considering investing, the deluge of information available to them frequently leaves them perplexed and wondering where to begin and how.

Those with money or experience are not the only ones who can invest. In order to stay ahead of the curve and meet their financial needs, young adults who are just starting their professions should also begin investing early.

Here are 5 reasons why every millennial should start investing now –

The power of compounding: Long investment horizons provide the greatest opportunity to capitalize on the power of compounding. Because they have so much time on their hands, millennials may make the most of it by starting to invest early. Compounding will provide large returns even on small initial investments over an extended period of time, laying a strong financial foundation for future investments. Millennials can take advantage of compounding over a longer time horizon by starting early, which gives them the chance to see exponential growth on their investment.

Extended investment horizon: Given that millennials are primarily in their late 20s and early 30s, they have a lot of time to smooth out market fluctuations and take advantage of long-term investment opportunities. To put things into perspective, equities mutual funds have returned 16.30% over the past 25 years. This means that if you had invested Rs 1,00,000 25 years ago, your money would now be worth Rs 60.30 lakh, or a 60x rise (Ace MF, March 2023).

Inflation: According to RBI Internal Research (2023), the average inflation rate over a 20-year period is 5.5%. If your monthly expenses are Rs 40,000 now, in ten years they will be Rs 69,000, after twenty years they will be Rs 1.18 lakh, and after thirty years they will be Rs 2.02 lakh. It is critical to make sufficient investments to outpace inflation. All other asset classes are outperformed by equities mutual funds in terms of producing a high real rate of return.

For example, the real rate of return on gold is only 4.46%, whereas stock mutual funds yield returns of 10.18%. Even after accounting for the effect of taxes, fixed deposits would not even come close to beating inflation.

Low entrance barrier: Since millennials are still starting their careers, they may not have enough money to make large investments. Mutual funds, however, have a relatively low entrance barrier. Starting capital for investors is as low as Rs 500. Additionally, customers have the option to invest small amounts each month through SIP. As a result, even individuals with minimal resources can now invest. 

Satisfying financial needs: Investors might achieve financial fulfillment more quickly if they develop the habit of investing frequently and early. Investors can realize their dreams of launching a business, purchasing a home, or taking a global tour by amassing a sizeable portfolio. Additionally, millennials might arrange an early retirement to enjoy their senior years with loved ones.

In summary, millennials benefit greatly from early investment in terms of securing their financial future. Millennials may best leverage the power of compounding and beat inflation by starting early. Distributors of mutual funds are a good resource for millennials who are just starting to invest. A distributor can assist investors in selecting a mutual fund plan that best suits their needs by helping them match their financial goals with their risk tolerance. Millennials may secure a stable financial future by meeting their requirements for money on time.

Financial independence is the ultimate goal for any investor. Additionally, a growing number of people are drawn to accumulating riches and being wealthy quickly these days. It can be annoying, though, when you discover how long the process takes.

For many years, mutual funds have been regarded as a reliable option for investors. With them, you can make a variety of stock investments that fit your requirements and interests.

Why should you prefer investing in mutual funds?

The interest of investors has increased along with the AUM of Indian mutual funds. Mutual fund assets have experienced a dramatic boost over the past few years due to a multiplication in growth. We have seen with great attention as mutual funds gradually find their way into an investor’s portfolio. Investing in mutual funds is now simple and available to anyone.

The mutual fund sector in India is expanding, but there is still more work to be done before it reaches the degree of development we hope for. India has a relatively low ratio of money invested to GDP—roughly 17%—compared to the global average of 76%. The U.S., Canada, and Australia are among the nations with ratios over 100%. 

This means that while bank FDs are at about 75%, India’s investment programs are only about five times that of their GDPs. Without a doubt, the mutual fund business in India is ripe for much greater expansion, yet it is nothing like bank FDs in terms of size. A statistical analysis titled “Consumer Spending Outlook 2022” projects that by 2022–2023, 31% of Indian consumers will probably invest in mutual funds. Only one-third of the investing population—who are restricted in many ways—will be motivated to invest in funds over the next four years. In this post, we’ll go over a few of the reasons why some people are reluctant to invest in mutual funds.

The reasons you might want to keep your assets in cash or other assets instead of investing in mutual funds.

Lots of people don’t know much about mutual funds.

Even though the mutual fund sector has been around in India for more than 25 years, only tier 1 and tier 2 cities are aware of it. Even among the educated population, millions of Indians are still ignorant about mutual fund operations. The only reason people even know these things exist is because of recent mainstream media efforts. Because of India’s customs and culture, most people still avoid having open conversations about investing methods or money management. Put differently, we’re not too keen to experiment with new goods or take chances. Still, the last several years have been a positive move. But there’s still a very long way to go.

Confidence in market-linked products can be low

One of the biggest obstacles for many investors is the risk involved in investing in mutual funds. Actually, investor reluctance is primarily caused by volatility and unknown area, which means that raising awareness and educating people about this fantastic investment vehicle is also a struggle. Knowing the advantages of investing in mutual funds is not as crucial as realising the range of risks associated with these kinds of ventures. Even when the benefits could exceed the expenses, consumers feel more confidence when they have all the information they need to make an educated choice up front.

Poor distributors/intermediaries reach

Accessibility is among the most crucial elements in influencing the growth and success of an investment opportunity. Although fewer people have access to intermediaries, more people are now aware of the advantages it offers. Indians feel most at ease among someone they can easily get along with and trust. Intermediaries can fulfil this role by teaching investors how to invest in goods that pique their interest; this takes handholding and developing a relationship of trust. Sadly, mutual fund distributors are hard to come by in India, and many cities still lack one. This is significant because distributors influence the level of investor confidence, mutual fund knowledge, and attraction to potential new investors.

Mutual fund investing may appear like a daunting endeavor, but there are several approaches available that are suited for various investment requirements. You should be aware of all the potential dangers and rewards before making an investment. Possessing the appropriate information, training, and digital literacy is crucial.

Conclusion

Ultimately, it takes a knowledgeable community to dispel myths and prejudices through fervent discussions. By dispelling some of these myths, you can assist. You are changing the financial literacy of our society by educating yourself and those in your vicinity. Together, let’s make wise choices and assist others in doing the same. Join the expanding Indian mutual fund investing community.

Every investor’s worst adversary is inflation. It gradually reduces the buying value of your money. Even if inflation isn’t always obvious, over time its effects become more significant.

For some, having the freedom to live the life they desire is what they understand by lifestyle. This is a subjective concept that has varying meanings for many individuals. We also have a tendency to update our expenses as our money rises. If your income increases by 1X times, for instance, you might spend twice as much on lifestyle items because you believe your lifestyle or social standing has increased. As a result, we eventually experience lifestyle inflation without even realising it.

People would remark things like “I seem to earn more, but I still can not save money” in this case when it comes to savings. This is the way that lifestyle inflation works, then. You end up spending more and more money in order to raise your standard of living. It can happen anywhere, from major purchases like purchasing a car to small, daily expenses like buying a cup of coffee. Money is increased as a result, but the issue persists. And that’s how lifestyle inflation turns into a stealthy way to deplete your wealth.

Human passion knows no bounds. We set new goals after achieving the previous one. It is almost hard to quit wishing for more.

Assume Tom, a diligent worker at a multinational corporation, gets a used tiny car for his first job. A few years later, he receives a promotion and purchases a new vehicle. A new SUV takes the place of the vehicle after a few years. Premium cars eventually appear, followed by superior luxury cars, and so forth.

You could have the same situation in any area of your life. Although these little improvements might not seem like much, they might build up to major costs that could negatively impact your finances.

The truth is that it can be difficult to give up your ideal lifestyle and settle for something less. On the other hand, you must look beyond and take the required actions if you want to keep your financial stability and sustainability. It has an impact on your dignity, sense of self-worth, and possible social impressions. We’ll examine many methods for preventing or combating lifestyle inflation in this post.

Avoid Maintaining the Status Quo!

Expectations are high in this day and age. A lot of people believe that they must stay in touch with their friends and neighbors. It’s not necessary to buy an iPhone, a brand-new car, or other pleasures, but far too many people do. Though many people still spend more than they should on these indulgences, the thrill of purchasing the newest technology might wear off soon. They wind up with costly goods and debt, which is never a wise financial move! Maintaining your focus on your goals and considering both the present and the future are crucial. You may more accurately assess what you need and which necessities are worth the cost if you plan your financial objectives ahead of time. The secret to living a debt-free, worry-free life of financial stability is to maintain your discipline by prioritizing your long-term goals and making consistent online investments toward them.

Think About The Invaluable Worth Of Your Purchase

Most people agree that relationships are immeasurable. Because of this, it’s wise to always think about the non-financial advantages of your purchases. Purchasing a BMW, for instance, can make you happy at first, but not for very long. Alternatively, investing in a seven-day family trip will undoubtedly yield enduring emotional rewards. This way of thinking will assist you in avoiding overspending and helping you make better judgments down the road, albeit it may vary from person to person.

Determine Which Financial Priorities to Aim for

Make a list of your needs and wants to help you understand and determine if your goals are on track. Put necessities before wants to keep your spending in check. Avoid going over budget and jeopardising your long-term financial objectives by creating a gap in them. Prior to obtaining what you desire, save money for it! The greatest method to guarantee your financial stability in the future is to set sound financial priorities.

Setting and sticking to financial priorities will go a long way toward helping you avoid giving in to temptation. You will think about purchasing a gently used car and beginning to accumulate an education or retirement fund after you realize your primary goals, such as giving your children a top-notch education and ensuring a sustainable lifestyle in your later years.

Having said that, you shouldn’t cut back on any of your spending. Just make sure to plan your purchases and spend sensibly. Recognize your current lifestyle and financial situation, and continue to invest through reputable and safe platforms.