How to Start Investing in your 20s | CA Rachana Ranade

In this video, we discuss how one can invest with low capital in his/her 20s. We talk about investing in 2 major investment avenues-Equity and Debt, along with an indicative portfolio allocation.

Oh hey folks say rachana ranade here and i welcome you all to another brand new lecture which is on how to start investing in your 20s if you are in your 20s i’m sure you might have just finished your education or you might have just started earning so this is a very important phase of your life when it comes to starting investing early so if you want to know

About all these basics let’s begin right away let’s understand the top 3 reasons why you should start investing early so the very first reason if you remember i said mere past work there so if someone starts investing at the age of 21 or 22 you can imagine that that person will be investing from this age till the age of 60 almost so you can imagine what a big

Corpus that person will have for his retirement purpose right number one number two is that because you start early you have the benefit of risk averaging now you will be like what is this risk averaging just have a look at this nifty chart now i’ll give you a practical example i qualified as a chartered accountant in the year 2008 have a look at that chat in

2008 so that’s where i started investing and as usual as a new investor starts investing immediately there’s a market fall everyone knows what happened in 2008. now you can imagine had i stopped investing because in a market as a sister okay whenever i start investing it will go down and all that that would have been a big negative point for me what i did i

Kept on that discipline of investing at regular intervals so what might have happened i invested in 2008 i invested in 2009 10 and now you can see at 11 already it has come back to the level of 2008 again i kept on investing 12 13 14 15. 20 i’m investing till date and now you can compare the level of 2008 with the level of 2020. it has majorly increased since

Then so can i say because i invested in a disciplined way because i invested at every specific time interval my risk was automatically averaged out so i hope you have understood this pri a point of risk averaging and the last important point is that you can have a very nice compounding effect if you start investing early but how is what we are going to check

Out immediately let’s understand how an amazing effect of compounding can be seen if you start investing early okay so we have to give some basic inputs inputs like what you have to give your input of your current age you have to give an input of what will be your retirement age right third thing you have to give an input of how much will be your monthly

Investment amount okay generally we talk about investing very systematically like like a sip systematic investment plan right and number four input that you have to give is how much returns do you expect okay let’s say we are taking we are going to take a return of 10 which is not very high if i’m going to talk about a longer time frame so shall we start

In inputting the data yes okay so the very first one is current age what is your current age okay 21 21 okay at what time do you want to retire now i will tell you 60 okay assume 60 how much are you going to invest monthly minimum target i’m going to give you 10 000 rupees monthly you have to invest okay let’s assume that you are going to get a 10 return

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Over how much time time frame 39 years that’s a longer time frame if you do this systematically over a period of 39 years every single month without missing even one month you are going to get an amazing return and your final amount is going to be 5 crore 76 lakhs 8 714 amazing just by investing 10k per month you are going to get that 5 crore plus amount now

Understand how compounding works meri password how does that work if you start investing at the age of 40 that amount is going to be just 76 lakhs okay i hope you have understood how big a difference can be created if you start investing early and if you have that financial discipline in you now let’s understand the top three things that young investors should

Avoid while investing the very first one is to follow the advice of your friends tipindra okay because that person is just going to give you hot tips and you’re going to just blindly rely on him so don’t do that don’t invest based on tipendra number two mistake which many people do is that exactly that’s what they do they invest in the market without having

Proper knowledge so if you do that again you’re going to fall flat on your face and you’re going to make losses don’t do that and number three is that please don’t follow the herd mentality there are going to be many people who are going to just invest because their friends are investing and their friends are investing because their friends are investing and

None of them knows why they are investing so avoid the herd mentality now let’s try and understand where can you invest your money i’m sure everyone knows that there are two major options one is equity and the other one is debt okay now question is how much should you invest in equity there is a very standard thumb rule which says that hundred minus your age

Should be your percentage investment in equity my math is not that good so assume that my age is 25 okay so in this case how much will be investment in equity it will be 100 minus 25 so 75 percent of my investment should go in equity and 25 should go in debt now the next question arises is that if i were to invest in equity how and where can i invest in equity

That depends on certain factors there are various possibilities possibility number one is that you invest directly in equities okay when can you explore this you can explore this if you have knowledge or possibility number two you’re prepared to gain that much knowledge by maybe uh watching a lot of youtube videos or checking out my various courses on my website or whatever reading books as well right so that you can do when you have knowledge in stock market or you’re ready to gain knowledge in stock market possibility number two you’re not sure about a specific stock but you’re sure about a specific theme we are going to talk about this in the immediate next part of the video right and possibility number

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Three is that you are neither sure about a specific stock nor are you sure about a specific theme but you are sure about the overall direction in the market so you remember that nifty chart from 2008 to 2020 it has gone in the upward direction so you feel that all in all it will go up so i want to invest directly in nifty can you do that answer is yes by investing

In nifty b’s for that i have a separate video on how and what are these what are the different types so whenever time permits you can check out that video as well so now let’s understand how can we invest in a specific team theme of investing with a small amount and theme of investing in top 100 companies top 100 based on what top 100 based on their market

Capitalization for that we have a top 100 small case which invests in nippon india nifty 50 bctf and nippon india junior bctf the weightage is also very clearly given 32.98 and 67.01 respectively now if you check the overview as well this this small case has clearly outperformed the equity large cap we also need to check what is the minimum investment amount

It’s just 554 rupees what is the cagr cagr is 16.91 so i think both our purposes of investing in top 100 companies by market capitalization with a small amount or just 554 rupees is very well suited in the small case so if you want to start your investment journey just check out the link in the description box also if you want to have a little bit of higher

Risk there is one more small case which is known as the value and momentum small case you can also check out the link in description for that but again be aware that second small case is only for those who are ready to take a shade higher risk let’s understand how can you start investing in debt now there are two options that we are going to discuss primarily

Today one is investing in ppf the other one is investing in alternate funds like what something like a gold fund or something like a debt fund but first let’s start with ppf very first and foremost point that you should know about ppf is that it has a lock-in period of 15 years why am i talking about this 15 years if you start early you will be comfortable at

A very young age means what i started investing in ppf when i was 21 and in the next year in if i’m talking about current scenario in the next year i would have completed my 15 years okay so calculate my age that’s homework but anyways next year i would have completed 15 years so my major lock-in is over now can i extend my ppf yes now extension happens only

For five five years so my lock-in is drastically reduced now so i hope you have understood the importance of starting your ppf at a very young age with how much amount can i start investing only with 500 rupees you can start your investment journey in ppf you can invest 500 rupees every month that is allowed what is the maximum limit maximum limit is 1 lakh 50

000 rupees whatever interest you’re going to get is going to be absolutely tax free and the interest rate currently is 7.1 right also you get a benefit under section 80c of the income tax act when you invest in ppf right now let’s move on with the second point that we are going to talk about investing in gold fund or investing in a debt fund if you invest in

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Gold we typically say that gold act as a acts as a very good hedge against the market volatility it’s always said that equity and gold move in the opposite direction okay so that’s why i’m saying that investing in gold makes sense as a good hedging parameter second one is a basic thumb rule wherein we say that never put all your eggs in one basket so even if

Pps ppf is good don’t invest entirely in ppf invest some in ppf some in gold some in debt that will give you good overall balancing number three if you’re investing in gold or in debt there is a chance that you may earn a shade higher than 7.1 percent right so i hope you have understood that even if i’m talking about investment in debt there are various options

Available in the market now let’s understand how can a portfolio allocation be done is this the only way where in the portfolio allocation can be done no this is just an example that i’m telling you now if you observe very carefully i’ve done two major parts the left one which talks about 75 percent that is investing in equity right one talks about investing in

Debt now if you check out debt i have given 25 equal allocation to ppf and to gold.debt funds okay can that percentage vary from investor to investor it can have given this as an example if you go to that 75 percent category now there have given different splits based on what based on the investors profile three category of investor profile low risk moderate

Risk and high risk here you can see that a person was low risk have given zero percent for stock sips directly into stock market and if you see the highest category person you can see that 45 allocation can be given in direct in equity investing so all in all i hope you have understood how based on risk profile your equity exposure the way in which you invest in

Equity can change from person to person if you want me to make a separate video on how to calculate risk please let me know in the comment section i’ll make a separate video for you well is there any small case which talks about investing in equity in debt as well as in gold all at the same point in time answer is yes the name of that small case is all weather

Investing of course again link is there in the description this small case has given a cagr of almost 13.63 well i hope you have enjoyed this video and if you have don’t forget to share it with your friends even if you are not in your 20s even if you are there in your 40s or 50s you can share it with your neighbors with your relatives and help me spread financial

Literacy and financial awareness amongst everyone till then take care and bye you

Transcribed from video
How to Start Investing in your 20s | CA Rachana Ranade By CA Rachana Phadke Ranade