Why should youth start investing in mutual funds?

When we think of financial investments, we usually tend to associate them with working professionals of a certain age. However, investing isn't just for those in their 30s or 40s. Investing is an essential life skill that can offer countless benefits, especially if picked up during the teenage years.
As the proverb goes – “The best time to start investing was yesterday, the next best time is now.” This certainly holds true when it comes to investing; the sooner a person embarks on their investment journey, the better the outcome. Moreover, mutual funds can be an excellent choice for teenagers and young adults, especially when it comes to cultivating a habit of smart investing.
Thankfully, the Indian market offers a wide variety of mutual funds to suit the palate and concerns of every type of investor, which means that there is something for everyone.
Here, we will take a closer look at why and how teenagers in India should plan their investment journey with mutual funds, aided and guided by a financial advisor and trusted adults in their life.

• Table of contents

1. The advantages of starting early
2. Opening the gateways to investment: How to get started
3. An investment allowance: Learning by doing
4. Choosing the right mutual fund: Building a diverse portfolio
5. The impact of mutual fund investment educationFAQ
6. Bajaj Finserv AMC

The advantages of starting early

The saying "time is money" takes on a literal meaning when it comes to investing. The younger you start, the more time your money has to grow through the power of compounding. Essentially, even small amounts invested in mutual funds can yield potentially reasonable returns over a period of time. So, imagine being in your early 20s with a considerable investment portfolio already up and running! A head start not only leads to financial independence at an earlier age but also instils a solid understanding of financial planning and money management.

Opening the gateways to investment: How to get started

The first step towards investing in mutual funds is opening a savings account. Most Indian banks offer savings accounts tailor-made for minors, often requiring an adult as a co-holder. Once the savings account is operational, it paves the way to open a mutual fund account. Many mutual fund houses and platforms allow investments on behalf of minors, with an adult as the guardian, until the minor attains the age of 18 years. Payment for such investment is accepted from bank account of minor, parent or legal guardian of minor or from joint account of minor with parent or legal guardian.

An investment allowance: Learning by doing

To offer a hands-on investment experience to teenagers, one can consider setting up an ‘investment allowance’. Similar to how you would set aside a weekly or monthly allowance for expenses, you could assign a small sum of money specifically for investing. This will encourage the habit of regular investment, which is an essential feature of mutual fund investing.
Under adult supervision, teenagers can decide where to allocate these funds, thereby learning how to balance risk and reward.

Choosing the right mutual fund: Building a diverse portfolio

While choosing a mutual fund, it is vital to consider the risk tolerance, investment horizon, and financial goals. Starting with relatively stable options like debt mutual funds or hybrid funds could be a good idea. Gradually, one can introduce equity funds into the portfolio as they get comfortable with market volatility. Additionally, adults can use this as an opportunity to teach teenagers about the importance of diversification in an investment portfolio.

The impact of mutual fund investment education

By encouraging teenagers how to invest in mutual funds, we not only empower them financially but also foster critical thinking and decision-making skills. Understanding market trends, researching funds, and evaluating options promote analytical thinking and prudent decision-making. Moreover, an early introduction to finance helps dismiss any intimidation or confusion they might feel towards financial markets as they grow older.

Conclusion: Investing in mutual funds can be a game changer for the youth

The impact of mutual fund investments on teenagers goes beyond money. It paves the way for financial literacy, cultivates discipline, enhances decision-making skills, and promotes a sense of responsibility. By engaging teenagers in the process of mutual fund investment, we can enable them to comprehend the financial landscape, thereby preparing them for the future. It’s important to remember that this is not about the amount invested, but about imbibing the habit of investing - a habit that can lead to financial freedom and stability in the long run.

Bajaj Finserv AMC

If you are looking to get your teenager started on their financial investment journey, you could consider some new options by Bajaj Finserv AMC. Bajaj Finserv AMC has launched four schemes including a liquid fund, flexi cap fund, an overnight fund, and a money market fund. Each of these investment vehicles provides professional management, and growth potential. However, it is important for investors to assess their investment objectives, risk tolerance, and consult a financial advisor before making any mutual fund investments.

FAQs:

Why is mutual fund investing crucial for the youth?

Starting early with mutual funds empowers youth to benefit from compounding over time. This can lead to substantial wealth accumulation for future goals like education, home, or retirement.

How can mutual funds help young investors secure their financial future?

Mutual funds offer an accessible entry point to investing. They provide professional management, reducing the need for extensive market knowledge. With a variety of funds catering to risk appetites, young individuals can tailor their portfolios for long-term growth.

What advantages do mutual funds offer to the younger generation?

Mutual funds allow youth to tap into diverse assets like stocks, bonds, and more, reducing investment risk. Moreover, by compounding returns, young investors can potentially get closer their financial goals earlier.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. This document should not be treated as endorsement of the views / opinions or as an investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.