Hirak writes, “I am a 17-year-old, and I want to learn and start investing. Help me out”. It is wonderful to see young people serious about investing and money management. We are honoured when they ask us about it.
We do not know the cash flow situation of Hirak. Does he earn part-time or full-time? Thankfully at 17, there are higher priorities, so we will focus on those. This allows us to write a “what advice would you give to your 17-year old self” kind of article.
1. Make use of the golden period: At 17, you have about a 10-12 year golden period to learn new skills (formally/informally) and make yourself employable. So plan for that even if you cannot afford formal education, push yourself to learn new things.
2. Take a long term view of life: You may perhaps have a side-hustle going for your immediate needs. While this is perfectly fine, think beyond the odd job here and there and develop a truly long term view of your life. What do you wish to do in 5,10,15 years? How are you going to get there?
3. It takes money to make money: Many of us make the mistake that high returns will make us rich. You can get a 25% return over the next ten years, but the final amount would not be significant if you did not invest enough. So all the time and effort you can spare should focus on increasing your income and ensuring it stays at that level. Investing is always a secondary task that should be automated to minimize time wasted.
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4. Do not judge success in terms of success! Never define success in terms of salary or education or belongings even success! “Success is nothing more than the progressive realization of a worthy ideal.” – Earl Nightingale. As long as you have a goal and are striving towards it, you are successful.
5 Happiness is not a destination (or an object). It is a journey: The above reasoning applies to happiness as well. No gadget can make you happy; No amount of money can make you happy. Happiness is productive engagement. It is going to sleep instantly after a hard day’s work with no time to worry about whether we are happy or not!
6 Balance is the essence of life: Money is there to be spent. When we “save” money, we do so to spend in the near future. When we “invest” money, we do so to spend in the distant future. Extreme behaviour like saving/spending all our money for immediate needs or investing all our money to “build wealth” is wrong.
We have to balance our present and future needs as best as we can. We will make mistakes in the process, and that is perfectly fine. Like success and happiness, marriage/relationships, finding a balance between our needs and wants is also a journey!
All the above can be summarised as:
Put your head down, work hard consistently without expectations.
Now let us consider investing. When young, it is important to tell ourselves that investment is capital that is not required for the next ten years. This means that unless there is an emergency (unexpected expense), we should not touch this amount.
So we would recommend Hirak to first “save” for his short-term needs – a mobile’ a DSLR etc., using a simple bank recurring deposit. The remaining amount (if any) can be “invested” in a Sensex or Nifty index fund. Recommendations are available here: Handpicked List of Mutual Funds Oct-Dec 2021 (PlumbLine).
After Hirak starts earning full-time (assuming he is not at present), he can consult our free e-book: Re-assemble Step by step money management basics to manage his money in a structured manner. We wish him all the best.
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Dr M. Pattabiraman (PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over 14 years of experience publishing news analysis, research and financial product development.
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