Reported By:
| Edited By: B Gopkumar |Source: DNA |Updated: Mar 08, 2018, 06:25 AM IST
Every Rs 1 crore earned over many years start with a seed capital of a single shiny coin of one rupee. When it comes to wealth generation, equities are the easiest ways to make money given their potential. The trick here, like in a marathon, is to start as early as possible and maintain your pace. The difference can be substantial: investing just 10 years earlier can actually grow your money manifold. All one needs is a small capital of Rs 500/1,000 that can easily come from your pocket money.
Youngsters today get a good sum of money from parents. However, this money is almost always spent for entertainment. Have you ever thought how much money you spend on buying pizzas, purchasing movie-tickets, going to clubs and 'hanging out' with pals? Many young adults also start spending on bad habits like smoking. One can easily save just 10% of your monthly expenses and invest as low as Rs 500 in mutual funds (MF). Have you heard about investment legends like Rakesh Jhunjhunwala or Warren Buffett? All of them started investing in shares quite early in their lives. This made a big difference to their overall wealth. A mutual fund systematic investment plan (SIP) allows you to save and invest regularly in a collection of stocks chosen by the fund manager. Think of the mutual fund as a wedding planner who fixes weddings for a fee. He/she does all the hard work, while you sit back and enjoy the event. With mutual funds, a youngster today can invest as low as Rs 500 per month and expect good returns. In the past five years, funds have easily given 15-20% each year. A mere Rs 500 monthly SIP can almost double your investments in 48 months if the funds grow by 20% each year.
Youngsters may have heard about your parents or elders discuss share market. This is a place where shares of different companies change hands. If you buy a share/stock at low level i.e Rs 100 and sell it at a higher price i.e Rs 125, you can make a profit of Rs 25 per share. If you bought 100 shares, your profit will be Rs 2500 in a single trade. While a MF, chooses which stocks to buy so that you do a SIP, many youngsters today also want to invest on their own. In short, they want to be their own fund manager. This is possible with stock SIP strategy. Just like an MF SIP does for a mutual fund, a stock SIP allows you to buy a pre-specified quantity of stocks at regular intervals. If you do this over a period of time, you can easily buy more shares at a lower average cost. When the share price jumps, you can expect much bigger profits. All you need to do is select the stocks you want to focus and regularly invest small sums in those stocks every month.
Trading in stocks allows you to make a quick buck if you stomach the risk. Youngsters spend hours hooked on to their dear phones. By giving merely 15-30 mins a day, young adults can easily trade on stocks and potentially earn through their phone. With the help of mobile trading apps powered by super-fast technology, an average share market trade takes less than a second. Today, young investors are using good brokers to get the twin power of technology and research at their disposal. Web, mobile and app-based trading at any time on the go have made the job much easier. The earlier one starts trading, the greater is their capacity to turnaround mistakes. The risk appetite in the early 20s is far higher than someone stepping into direct equity investing mid-30s. Once investors are comfortable with equity trading, they can venture out to other assets like currencies and commodities with a mission to diversify portfolio risk.
The writer is CEO of Reliance Securities
