The secret of high returns in any investment is to start investing early. For millennials, GenY, born after 1981 - who form the majority of India's workforce - this festival season is the right time to start investing. Balachander Sekhar, CEO of online insurance platform RenewBuy.com, explains the importance of investing early and the best options available, during an interview with Nirmala Konjengbam. Edited excerpts.
Q: Why is it important to start investing at an early age? How will this help in achieving future financial goals?
Investing at a younger age always helps in generating better returns and creating more wealth. In fact, if millennials can create a balanced investment portfolio from an early age, they can reap huge benefits at the time of retirement. Also, early investments help in meeting unavoidable expenses in the long run and help people sail through the tough times.
The most important factor for a millennial to achieve a financial goal is to set a clear financial goal, for the short term as well as the long term. Investors can take calculated risks. Measuring the risks will help them gauge how far they are ready to take up the financial consequences. The risk tolerance level should also be measured before putting in the money. It is also important for the younger generation to diversify assets. This acts as a risk protection layer. Building a diversified portfolio, integrating multiple asset classes are the best ways to generate optimum risk-adjusted returns from various asset classes. However, they need to keep in mind that investing in too many funds might make it difficult to track the performance of the funds, and hence could lead to losses in the long run.
Q: How will investment during the festival season help millennials to achieve their goals as well as form a good money habit?
The festive season is one time of the year when millennials enjoy splurging on expensive gifts and the latest electronic devices. Though an investment might not sound as exciting as buying the latest smartphone or or gadget, it is the wisest decision in the long run. To add to this, COVID-19 has made everyone realise the importance of keeping ourselves prepared for uncertain times. People have suffered from job losses. The salaried class has been badly affected. These reasons are strong enough to understand the importance of investing from an early age. What could be a better option than investing during the festive season, when people receive festive bonus and cash gifts from family and friends. It will not only help them in achieving financial goals but secure the future of their family.
Q: What are the best investment options?
Millennials are smart investors; and seven out of 10 looks for good opportunities. The COVID-19 (led) stock market breakdown in March gave millennials an opportunity to start investing in the stock market. Despite high volatility and fluctuations in the global stock market, there has been a record growth of investors in the Indian stock market. Health insurance is another investment that witnessed a record growth amongst millennials after the COVID-19.
The festive season this year should also be utilised for making wise investment decisions. Millennials usually tend to avoid investing in health insurance because of two main factors - younger age bracket and the amount of premium. But health insurance, on any given day, will help in meeting the rising cost of medical care. Without health insurance, they might not be financially prepared to pay the heavy medical bills in case of any kind of medical emergency. COVID-19 has been a testimony to the unforeseen medical needs in life.
The insurance market today has multiple beneficial options to choose from, making it easy and accessible for millennials to make informed choices of investment. A well-thought-out health insurance policy could be one of the best investment options this festive season.