Investing 101 for Millennials – Investment for Fulfil Short Term Needs

Most of the investment advice we get – from our parents, from the insurance ads we see on TV and from neighbourhood “investment uncles” or financial advisors – relates to long term investment. But which millennial has time for that? We only live once and there is no time to lose worrying about what will happen that far into the future. It is important to grab hold of the present moment that is fleeting enough as it is. Our short term needs already need to be financed. There is a whole world to see, and with technology advancing at the rate that it is, it would be good to have sufficient savings to afford the latest gadgets. And let’s not forget that some of us might even want to have some capital saved up for a higher education, perhaps abroad.

Financing all of these short term goals can be much easier with short term investment. Your money can earn for you, allowing you to achieve your goals in a shorter amount of time and with far less effort. You won’t have to break your back earning the whole amount required – you can earn a part of the amount and then that partial amount can earn interest on itself and grow to the full amount. Sounds like a good deal? Indeed it is.

Here are five simple ways to start investing

1. Savings account

Get a new savings account and don’t set up the ATM card for it. Keep putting aside money into this account every time you manage to save a little. At the end of every month, be sure to put aside any leftover balance from your zero balance salary account by transferring it into your savings account. You will earn only a small amount of interest on your savings account – say 4% to maximum 6%, usually paid out monthly, but it is something and the amount is risk free and ready for withdrawal (in case of emergency or when you have saved up enough to meet your financial goal – this might be a new gadget, or a holiday, or some course that you want to do).

2. Fixed deposits

If you have gathered a lump sum in your savings account and would like to stay invested for a longer time, instead of spending the amount, you can opt for a fixed deposit. Shop around to get the best interest rate. Nowadays you get fixed deposits of varying tenures – choose one such that the date of maturity coincides with one of your financial goals. Your fixed deposit certificate will mention the amount that you will assuredly get on maturity. Seeing that reward amount in black and white can be very motivating in terms ensuring you stay invested.

3. Mutual Funds

Mutual funds pool your money with that of other investors – this pooled capital is then given to the charge of a fund manager, who invests your money in stocks, bonds, debentures and sometimes also in other mutual funds. The fund manager is expected to be an expert in his or her own right and is supported by a team of similar experts who are all put on the job of making investor capital grow exponentially. Mutual funds may be high risk or low risk, but are always subject to risk because they invest in the stock market, which is high on both risk and rewards. You can potentially make your capital grow much faster with mutual funds. Most mutual fund investments can be withdrawn at any time, except the tax saving ELSS variety, which has a three year lock-in against a Rs 150,000 tax exemption.

4. Stocks with pre-set targets

Trading apps such as the Angel One app allow young, tech-savvy investors to access the stock market easily. You can pursue earnings targets while cutting your losses. This is achieved by filling out specifications related to your stop loss and the stock price that you would like to sell at. If the stock price goes below a certain amount, your stock will be sold (avoiding further loss) and once the profit target is reached, your stock will be sold.

You can choose to trade for the short term and you may even choose to conduct intraday trading, where you buy and sell your stock on the very same day. Technology has made it possible for people to carry out intraday trading from their smartphones. Also, you might be able to get by with just an hour of trading in the early part of the trading day. This way, neither your money, nor your time are tied up.

Of course, if you intend to invest in stocks, it is advisable to educate yourself on the stock market and understand a few basic trading strategies and stocks market terminology. You can get this too on the Angel One app, or even on the Angel One website. Blogs, such as this one that you’re reading right now, along with podcasts and videos on various topics are up for free access.

5. Government bonds

A bond is a stock market instrument that represents a loan given by an investor to a borrower. The borrower might be a corporation or the government. Government bonds are typically seen as safer because one can depend on the government to not run off with your money – that said, like all things stock market, government bonds are subject to market risks. A bond certificate will usually give the date of maturity, along with the variable or fixed interest that will be paid upon maturity. As with fixed deposits, you can plan for your financial goals to coincide with the maturity date of your government bond investment.

You’re probably wondering why we haven’t talked about gold, real estate, life insurance and cryptocurrency. Well, the first three are long-term investment vehicles. You need to put in a decade or so of waiting for these investments to deliver sufficient returns. Life insurance is definitely advisable when considering your long term financial well-being, but definitely cannot be looked at through the lens of short-term investment. It cannot satisfy your short-term financial goals.

As for cryptocurrency, two things: When investing in something faddish, it is always better to get in the game before the curve. Clearly, since everyone is already talking about cryptocurrency, the early movers bus has been missed. You should have a clear understanding of how any investment works and there should be decades worth of historic data to depend on if something is to be a stable sort of investment – you cannot satisfactorily check either of these boxes with cryptocurrency.

For short term investments, it is best that you go with the more straightforward options such as savings accounts, fixed deposits, mutual funds, stocks and government bonds, all of which we have detailed here today. Say goodbye to stressing and hello to better investing. Remember, EveryoneCanInvest and so can you! Investing is for everyone irrespective of age, gender and occupation. You can start the upcoming financial year by investing right with Angel One.