Owing to the fast-paced world that the millennials live in, they believe in the concept of ‘living in the moment’. This results in lack of motivation and patience to invest for the long run. This could be one of the reasons why millennials are scared to invest.
The pandemic and the demonetization has taught us the importance of having a financial security and also having a source of passive income along with an emergency fund. Let’s understand what is stopping millennials to invest for the long term?
Why are millennials scared to invest?
Many millennials have heaps of debt to pay, usually in the form of student loan. Millennials should primarily focus on getting rid of it. That’s not it. Millenials without a student loan are always on the lookout for seeking heavy debts to buy depreciating assets such as cars, mobile phones, gadgets, etc. This results in these ‘savvy-investors’ to fall a victim of debt trap and be engulfed in this vicious cycle.
Additionally, these type of investors often get carried away by free webinars and trading workshops that highly promote day trading. However, they fail to understand that trading mutual funds, stocks, and any other financial assets for instant gains without prior knowledge and experience can be extremely disastrous and can lead to wealth destruction. Another factor is the fear of losing their hard-earned money engrained in them after witnessing the market crash in 2008 and 2020. As their judgement is clouded by fear, it results in taking wrong investment decisions which further discourages them from investing.
How should one overcome their fear and start investing?
Experts believe that individuals should invest a part of their income, irrespective of the size of their annual income. This instils a habit of regular savings among investors. One can achieve this by creating a budget and analyzing the surplus savings left with an investor to invest.
If you are looking for the best investment option to invest, there is no one single answer. What’s a perfect investment option for you, might not be for someone else. Hence, an investor should invest in mutual funds based on their personal financial goals, risk profile, and investment horizon.
If you are looking to expose your investments to equity for a long-term, you might consider investing in ELSS tax saving mutual funds. Equity-linked Savings Scheme, commonly known as ELSS are mutual funds with at least 80% of their assets in equity and equity-related instruments. ELSS funds also offer the tax benefits of up to Rs 1.5 lac u/s 80C of the IT Act, 1961. These funds have the lowest lock-in tenure of just three years. ELSS tax saving funds thus offer the investors dual benefits of wealth creation and tax exemption.
If you do not have discipline to regularly invest in mutual funds, you might consider opting the SIP route. Systematic Investment Plan is a means offered to investors to invest in mutual funds. SIP investments ensure regular investments in your preferred mutual fund schemes for a period of time. Happy investing!
