One of the most important things that you can do to live a free, comfortable life and without any mental stress is by making yourself financially independent. If your finances are managed professionally and investments are in the right place, you have freed yourself from the shackles of financial distress.
It is crucial to understand the importance of financial independence in the early stages of one's life, especially when you start earning, as you will be able to witness the magic of compounding. It is advisable to start investing right from your from first pay cheque to achieve financial goals and freedom to spend wherever you want.
So, when and where does one start investing? Experts say 20s is the age when people start earning and they should at least save and invest 10% of their income. In this age, saving and investing gives you greater flexibility since your responsibilities are low. For beginners, they can start with mutual funds and stock markets.
Yes, stock markets are one of the best investment options for wealth creation. It is risky but if you do your homework well, investing in exchange traded funds (ETFs) can pay you in the long run and even offer returns of 11 percent or more.
Billionaire investor Warren Buffett says one should invest only in investments that one understands. Before investing in a company’s stock, he says one should understand how the company makes money and the main drivers that impact its industry in no more than 10 minutes.
It is risky but quite worthwhile. Track your investments at regular intervals and understand the mistakes you are making. Invest as per your goals and you could turn out to be a successful investor.
Also, don’t put all your capital in one basket. Here, diversification is key. For starters, two investments are enough and as your salary grows, you can manage your portfolio accordingly.
If you have been following your friend’s or colleague’s investment strategies, put a stop to it right away. Ditch the herd mentality and carve out your own asset management strategies as you know your goals well.