How to Start Investing at 20 Without Any Previous Knowledge

I'm just turning 20, and I'm eager to start investing some of my savings, but I have no idea where to begin or what I'm doing. What should I do?

If you're in a similar situation, you might be feeling a bit overwhelmed. It's common to feel stuck and unsure about how to proceed with investments when you lack prior knowledge. This article will guide you through the key steps and resources you need to start investing confidently.

The Importance of Continuous Learning

First and foremost, knowledge is the first step to making informed decisions. Here are a few resources and tips to help you get started:

Read books like Rich Dad, Poor Dad and A Random Walk Down Wall Street. Watch educational videos on YouTube focusing on investing basics, like channels dedicated to finance and investing. Listen to podcasts that discuss investment strategies and financial literacy. Search for "investing basics for beginners" and related keywords on Google to find comprehensive resources. Watch interviews from financial experts on TV channels like CNBC, Zee Business, and others.

Commitment is key in this journey. Aim to invest at least an hour each day in learning about investing. The more time you dedicate, the faster you'll build your understanding and confidence.

Choosing the Right Resources for Learning

When it comes to learning about investing, two names stand out: NerdWallet and Investopedia. Both offer a wealth of resources and guides tailored for beginners:

NerdWallet provides easy-to-understand explanations of financial concepts and has articles on the pros and cons of different investment options. Investopedia offers a vast library of resources, including tutorials, definitions of financial terms, and detailed guides on various investment strategies.

Begin by exploring these sites. They will help you understand the basics of investing, including what to expect and what different investment plans involve.
Consider your primary investment goals, which will dictate the type of service and investments you choose. Remember, investing always carries some risk, and gains are not guaranteed. Keep a portion of your savings in a liquid account to handle unforeseen circumstances.

Why Invest in a Company’s Retirement Account?

The advice I would give is to take full advantage of your employer's retirement plan if possible. Contribute as much as you can to the company’s retirement account. Here are some reasons why:

Maximize Your Contributions: By contributing the maximum amount to your company plan, you can boost your savings and take advantage of potential employer matches. Investment Diversification: Start with a good quality growth mutual fund. These funds spread your investment across a broad range of stocks, minimizing risk. Spending Time on Learning: Use the time to learn about finances and investing. Knowledge is power when it comes to managing your investments successfully.

Once you have a solid foundation of knowledge, you can make more informed decisions and grow your investment wisely.

Embracing the Risks

There's no denying that investing isn't the easiest path to wealth. But it's also not too late to start. If you have no prior experience with investing, there's no need to panic. There are numerous materials and courses available online to help you. Take the time to educate yourself to avoid future regrets.

Investing is not just about making money. It's also about building a long-term financial strategy that will serve you well into the future. Here's the roadmap:

Invest in yourself first. Learn about finance, investing, and money management. Books, online courses, and financial experts can be your teachers. Open a PPF (Public Provident Fund) account. Start saving in this account to earn annualized interest of 7.1 percent. This can be a good foundational investment with a lock-in period of 6 to 15 years. Take adequate life and health insurance cover for yourself and your family. Ensure you keep renewing and increasing your insurance coverage over time. Build an emergency fund to cover unforeseen expenses. Aim to save as much as your budget allows. Start planning for your retirement. Aim to accumulate at least 4 to 5 crore rupees in your retirement fund, which will help you during your golden years.

Do your research and seek help from experts if you need to. Making well-informed decisions is crucial in the world of investing. Remember, investing is a marathon, not a sprint, so keep going.