Where to invest?

exploring options

hasty Experts say young professionals tend to spend everything they earn.Unfortunately, they’ve been rather vague about how much we should save, what interest rates are favourable, and how to balance both the risks and returns of our investments.
Young professionals, who have just started accumulating wealth, are faced with a myriad investment options, whether they be mutual funds, fixed deposits or dabbling in the stock market. Metrolife speaks to a few financial experts to find out how their young customers are managing their money.

Anjan Kumar, an investment consultant with six and a half years of experience behind him, says that he is often approached by people in this particular demographics.
“They tend to go for unit link insurance plans these days,” he says. These plans are thought to provide protection and flexibility in terms of investment. On the contrary, investors above the age of 40 tend to go for safer options like mutual funds or fixed deposits.

B N Prakash, who is also an investment consultant, agrees that these ULIP schemes are popular amongst young investors.

“They are linked to the stock market, and so they have an element of risk. However, they are also capable of delivering higher returns,” he says. He adds that another common option is term plans, which is a less risky alternative.

“This involves paying a moderate annual premium, and offers higher returns. Investors who are looking out to secure the positions of their families or cover a previous liability tend to go for such schemes,” he explains.

Prakash believes that young professionals of today are incredibly savvy in terms of following the latest investment trends.

“They study market conditions, and make a conscious attempt to plan their investments. Not only are they aware of all that the market has to offer, they’re also sure about what they want,” he claims.

However, not all financial experts share this view.

Kumar believes that investors below the age of 25 are generally not informed about their options, and tend to make decisions based on the latest trends, namely what they see on television or read about in newspapers.

“Two or three years ago, most people either invested in mutual funds or took part in direct investments. Today, the trend has shifted to the ULIP schemes. These trends come and go, and often depend on market conditions. We try suggesting better alternatives to these young investors, but they are stubborn in making their own decisions, and this often results in investments which aren’t smart,” he explains.

Satish, another investment consultant, claims that very few people below the age of 25 ever approach him for advice on investing. Most of his clients are in the 30 plus range.  

“We try advising young earners that the time is right to start channelising a small amount of their income into investment, but they rarely listen. Their tendency is to spend everything they earn,” he says.

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