Dilemmas Of A Young Investor In Different Phases: Here Is How To Tackle Them

Thanks to the growing economy, the young generation is not only earning well compared to their previous generations, their spending power is indeed boosting the economy in turn.

- Sanjiv Puri

While most youngsters focus more on spending, it is imperative that they give adequate attention to their investment habits as well. Here are 5 important questions and their answers, faced by a newbie to the world of investments.

I have recently started earning. Why do I need to start saving for retirement so early?

Among several other reasons to suggest saving for retirement early in life, possibly the one that could gel well with youngsters is that the amount required will be considerably less compared to making a delayed start. By starting to save early for your retirement, one will benefit from the magic of compounding. Most people are unable to fathom the true cost of delayed savings. For instance, Rs. 10,000 per month saved for 20 years would grow to roughly Rs 1 Crore (assuming a 12 percent return). In 30 years, the accumulated amount would be closer to 3.5 Crore. Look at the kind of difference a 10-year head start can make!

Also, remember the 30:30 rule of retirement. 30 years of earning period feeds the 30 years of non-earning period! This is because with increasing life expectancy, the non-earning period in an individual’s life is increasing and one needs to make provision for it as early as possible.

I am new to stock markets. I don’t want to risk my earnings by investing in equity mutual funds. Is there any risk by not investing in equities?