Investment is a crucial aspect of one’s financial planning. And it is not just limited to adults but also extends to teenagers. As an adult or a teenager, we all have wondered that it is essential to start investing early in life to achieve financial goals in the future. And it’s true! Moreover, teens in India now have an opportunity to cultivate the habit of investing and become financially independent, because the importance of financial literacy has increased in the fast-paced world of today.
With technological advancements and easy access to information, teenagers have the means to educate themselves about investment options and make informed decisions. By learning about investments at an early age, they can gain a head start in building wealth and securing their financial future.
Moreover, the recent developments in India’s financial landscape have made investing even more accessible for this age group. Such as mentioned below:
- The government has introduced various investment schemes specifically designed for small investors, such as the Sukanya Samriddhi Yojana, encouraging parents to save for their daughter’s future through tax benefits and attractive interest rates.
- Bond Public Issues with minimum investment limit of Rs.10,000 provide a more accessible investment opportunities for young investors, offering a reliable avenue with stable returns.
- The RBI has increased the Public Provident Fund (PPF) investment limit, presenting teenagers with a long-term investment opportunity with tax-free returns.
While teenagers have the resources and opportunities to explore investments, seeking professional advice is always beneficial. Going further into the blog, let’s discuss the 7 best investment lessons teenagers in India should know.
Lesson 1: Investment in Education
One of the essential investments that teenagers can make is investing in education. India is a developing nation that needs qualified workers to support the expansion of its economy. The cornerstone of each career is education. Furthermore, for teenagers who have not yet entered the workforce, it is a long-term investment.
It is worthwhile in the long run, even if it necessitates a big expenditure. According to recent reports, the Indian government has introduced the ‘National Education Policy,’ which places a strong emphasis on vocational education and might be a great investment for young people who want to pursue non-traditional jobs.
Lesson 2: Starting Small
Fortunately, teenagers don’t need a substantial amount of money to start investing; it can be as simple as investing in small amounts. The Indian government has introduced a number of small-investor investment plans in recent years. So, even if teenagers invest a small amount, it can help them to cultivate the habit of investing.
Lesson 3: Diversifying Investments
It is a crucial piece of advice that teenagers should not invest all their money in a single investment option. They should diversify their investments to minimize their risk. For instance, they can invest in bonds, stocks, mutual funds, government schemes, or real estate. So, if you’re a teenager and considering investment, try different options to increase your chances of benefiting from various returns in the long term. The number of retail investors in the Indian stock market has increased recently, which may be encouraging for the adolescent demographic interested in stock investing but at the same time, it is important to balance the risk by investing some portion in low risk assets like bonds, sovereign gold bonds, etc.
Lesson 4: Long-term Investment
You can invest in long-term investment possibilities because you are a teen and can make use of your years. High returns can be obtained in the long-term. Therefore, it is crucial to build a strategic plan and develop patience to generate long term gains.
For instance, you can invest in sovereign gold bonds for 8 years. Sovereign Gold Bonds are bonds denominated in grams of gold and they are issued by the Government of India. This modern way of investing in gold allows you to tap into the gold market without the hassles of storage and handling costs. Also, SGBs provides a chance to earn 2.5% p.a over and above the price appreciation in the value of gold.
Lesson 5: Understanding Risk and Return
Understanding the concepts of risk and return is one of the fundamentals of investing, even if you are a teenager just beginning to think about it. Mutual funds and other high-risk assets, like equities, can yield large profits, but they also carry a larger risk of loss. Conversely, low-risk investments, such bonds, FDs, etc. have a smaller return but also a reduced risk.
Hence, you should understand your risk tolerance and choose an investment accordingly.
Lesson 6: Compounding Interest
Teenagers should understand the concept of compounding interest. It is the interest earned on the principal amount, which is reinvested to earn interest on the interest earned. Also, it is an effective for long-term financial planning. Investing in the stock or bond market, for example, could greatly boost your returns by utilizing the compound interest feature.
The Indian government is currently taking action to boost bonds and entice retail investors to make investments. Furthermore, investors may now easily access bond market and discover transparent pricing, a privilege that was earlier accessible only to big financial institutions.
Platforms such as TheFixedIncome have been instrumental in making bond investments accessible for retail investors. The Securities and Exchange Board of India has rolled out new framework and regulations for Online Bond Investment Platforms (OBPPs) that has been instrumental in enhancing investor protection and confidence in this emerging market.
Lesson 7: Seek Professional Advice
Teenagers should always seek professional advice while investing because it can be overwhelming for them to understand the various investment options available in the market. Our competent relationship managers at The Fixed Income can provide with all the necessary information and understanding of the bond market. They can also assist you in tracking your investment performance. At TheFixedIncome, our primary goal is to educate and spread awareness around investing and bond market. That’s why we have curated Bond Guru- a dedicated platform for learning and gaining insights into the markets.
In summary, Investment may not be rocket science, but it requires careful planning and execution. Teenagers in India have an opportunity to invest and cultivate the habit of investing in themselves. Moreover, youngsters who invest in the stock market has increased significantly in recent years, according to a National Stock Exchange (NSE) poll done in India. And the reason for this rising tendency is that youths are becoming more financially literate, and digital platforms make it simple to obtain knowledge about investments.
Globally, the interest in investment among teenagers is also on the rise. This trend is driven by the accessibility of investment apps and platforms, which allow teenagers to start investing in small amounts and learn about financial markets.
Furthermore, in countries like Singapore, investment education is part of the national curriculum, further emphasizing the importance of financial literacy and investment knowledge among teenagers. This proactive approach has resulted in a higher percentage of teenagers investing their money and being actively involved in managing their finances.
These highlights the growing awareness among teenagers worldwide and in India about the significance of investment and the need to start early. Teenagers may now learn and make educated investing decisions that can impact their financial future because of the abundance of knowledge, resources, and investment options available to them.
To conclude, you can begin your teenage investing adventure by following these seven essential investment lessons. Current information on India’s investment sector reveals efforts by the government to promote investment. So, stay mindful of these advancements and integrate them into your financial plan. Happy Investing!
Disclaimer: Investments in securities markets are subject to market risks, read all documents carefully before making any investment.
