The Dilemma of a Young Investor fresh out of college!

Published: March 21, 2019 at 11:36 am

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Happy holi! In this guest post, Pratik Jain discusses the issues and problems a typical young investor fresh out of college faces. You may remember Pratik from his previous post on How to do Online KYC via ETMoney to start investing in Mutual Funds. I am so thrilled that young people less than 25 take an active interest in money management. They also put to shame for I wasted all the money earned in my 20s: The Financial Arrow of Time.

Pratik is a final year student of computer engineering and interested in Technology, Coding and personal finance. This is part of  “freefincal reader story” series. Read the full archive here. If you wish to share your personal finance story, send me a message. Over to Pratik.

Spending vs Saving

    This problem starts from the day you start getting your pocket money. How to save money and control spending always remains one of the top problems for youngsters. I was frugal by nature, but many youngsters spend money on weird things. Most of us spend due to two reasons one is impulse buying and second is peer pressure. I control impulse buying by simply delaying the buying, it is not so easy but if you really want to stop you have to have control of yourself.

The Dilemma of a Young Investor fresh out of college!

Many of my friends start uninstalling apps like Paytm, Amazon, Zomato because they spent too much on it. If you are one such person then let me tell you that app is not a problem you are the problem! One way to control it is to start saving for something big such as a Bike, Laptop or something, One of my friend did this and when he finally accumulated target amount he didn’t buy that Bike. If you can’t stop your habit then stop reading the article here, because you might face bigger problems than managing finance in future.

Another big challenge is Peer Pressure, Let me give you an example of this. I don’t know if you are aware of this new trend or not but many youngsters are paying for photographs to post on Social Media, Rate of such pics clicked with DSLR is average 100rs per click. Many peoples are spending 1-2k per month on this, and this is not enough so they also buy likes on these social media pics. No one among my friend circle has impressed a girl with these over-edited pics. It’s not that all these peoples are aspiring models, this is simply because of Peer Pressure.

This is actually a game of show off, and this is the reason I decided not to post any pic on social media ever. If you do something and post it for showoff that’s great, but when you start doing stuff for show off that’s where the problem starts. The only way to avoid it is to stop playing this game of showoff! Believing in delayed gratification is the first thing you need to start Investing.

How it all Started

   A few years ago I read “Rich Dad, Poor Dad” book, and after reading that book I felt so motivated that I started thinking of plans to make money. Certainly, those plans were not practical, and I didn’t know how to make practical plans which will work in real life. Last year I got placement in an IT company, I was happy but soon I realized I have to pay taxes on this so to save taxes I googled. Just like many people I came to know about Mutual Funds because of ELSS and joined many FB groups to understand the concept.

When you search randomly, the possibility of you getting a correct source of knowledge is very less, the same happened to me. Reading Posts and comments about random people’s problem in public forum will only add to your confusion. It took me one month just to get used to terminologies in personal finance. Only right thing I did then is never asked about the best fund to start SIP!

Learning the Basics

   In learning anything mentor plays a vital role, it’s not that we can’t learn without the help of anyone but having the right direction is very important to reach the destination. Just another day I was trying to figure out what is the difference between debt and equity one person asked if you seriously want to be a DIY. That was the time I met Ananth sir, he taught me and a bunch of other people’s about the basics of personal finance. He started with the meaning of index, types of index, mean, standard deviation, alpha, the difference between trailing and rolling returns, Asset Allocation, selecting mutual funds and many more concepts.

We are lucky that there are a lot of forums, Youtube channels, and websites like Freefincal available for us to learn these basics. Only thing is we should be able to differentiate between right and wrong information out of this by thinking logically and rationally. Otherwise, there is an equal risk of getting trapped into wrong products. Freefincal is more than enough source of information to learn anything, even the complex products like Health Insurance are explained in a simplified manner on Freefincal. On a public forum, we need to take extra caution as there is a high chance of you being a customer of agents.

Why DIY?

When you are young there are chances of getting growth and opportunity in your main job, then why study personal finance instead of focusing on the main job? I am being asked this question many times by myself and my friends. I can always outsource the job of managing finance to a fee-only advisor and focus on my main job. But if I don’t understand the difference between good and bad investment I am completely dependant on advisor’s honesty and ethics.

There is no guarantee that they will not push you towards bad products, so at least to check if you are on the right track you need to learn basics. When you are young and unmarried you have enough time to handle your main job and learn about personal finance. So after learning, I decided to be a DIY because I understand personal finance is not equal to self-brain surgery as many of them try to project. I don’t recommend being DIY to everyone, but I recommend everyone to learn personal finance, especially when there are so many resources available and you have time on your side.

Taking the First Step

Faith is taking the first step even when you don’t see the whole staircase. I had a feeling that first, I will learn everything and then will start with a full proof plan. This is the feeling almost all newcomers carry. Everyone is waiting for the best time, best strategy, best fund. I was also waiting for a significant amount to come into my pocket and then I will start with the best strategy. But, to reach the goals what matters more is Start and not the Best Start. Deepak Kaltari always pushed me to start and not wait till you master the Personal Finance subject.

Unlike most people, if you know many things about finance before making any investment it is the most confusing thing that where to start. When you are young you might also think that I can’t make money by investing such a small amount. Perhaps you are right, I used to think the same. But there are many other positive things you can get because of this. You will get used to investing and volatility in equity, which is hard if you start with a big amount. You will develop a habit of investing which is the most important factor to reach goals. So instead of waiting just start with whatever you have once you understand the product, don’t wait for best.

Learning and Unlearning

After investing I was checking index twice-thrice a day straight for 10-15 days. I was even monitoring indexes where I haven’t invested yet. Soon I realised, I need to get rid of this bad habit and start learning and unlearning new things. Learning is a continuous process so whenever you get time, start to learn from good sources. While I will continue to learn about new things in spare time but my aim now is to focus on the main job. Being a young investor you should give more importance to your main job. Stability and growth in the main job should be your priority.

The worry of the market will only disturb your mind negatively, Real Discipline and Systematic Investing(Which is not equal to SIP) will make you reach your goals! Happy Investing.

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About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
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