Perhaps the best time to start investing is when you’re a teenager. You can save some from your pocket money and put them in the right place to make gains. Having extra is always good and something that can be best ensured by investing from that stage only. Even parents can choose from the best investment plans for teenagers. But, what classifies an investment plan the best for teenagers? The answer is – it should help teenagers pay their recurring college and hostel fees on time. Besides, these plans should come with easy-to-invest features and offer reasonable returns if not explosive. So, let’s find out which plans serve these purposes the best way.
Let’s Check Out the Best Investment Plans for Teenagers
Keeping in mind liquidity, ease of investing and returns, trusting liquid funds, short-term fixed deposits/recurring deposits would be good. But spare some for equities too even though they come with a high degree of risk. Let us elaborate on the utilities of all these best investment plans for teenagers.
Liquid Funds & Why Are They Important
Liquid funds invest in financial instruments having maturities of up to 91 days. These instruments include certificates of deposits, treasury bills, commercial papers, etc. And within such short-term maturities, the interest rate of these instruments would most likely remain stable, ensuring investors of a safe return. Also, you can withdraw from these funds anytime just as you do with a savings bank account. Although returns from liquid funds are not fixed, they are usually higher than the ones you receive from bank deposits.
Short-term Fixed/Recurring Deposits
Booking fixed or recurring deposits for the short term could also be good for teenagers. While fixed deposits mean a lump sum deposit once, recurring deposits are the ones you do every month till the specified tenure. You can open both these accounts at a bank for a minimum of 7 days to a maximum of 10 years. The minimum deposit amount for fixed deposits is INR 5,000 across most banks. Whereas recurring deposits can be opened with a minimum of INR 1,000. The interest rate of both fixed and recurring deposits remains the same for a particular bank. So, compare the deposit rates and choose the one that offers you the maximum. On average, deposit rates can be around 3-7% per annum.
Many of you may not find stock investments suitable given how rapidly they fluctuate based on economical, political and social developments. The market may go down rapidly in case of a war that is now taking place between Russia and Ukraine. And it has fallen due to that. But at such times, you can buy stocks of big companies at a much lower rate compared to other times. So, it helps you enter into the market with quality stocks and earn you big returns when these stocks go up.
Choose Mutual Funds for Calculated Risks
As teenagers and their parents may not be market experts, trusting the power of mutual funds and the managers in charge of the same will be good. The money invested in mutual funds goes into stocks of various companies and thus ensures investment diversification. It means the loss from one stock can be compensated with the gains made by others. That said, do check the returns of different mutual funds carefully and choose the one that has performed brilliantly over the years. Don’t choose based on short-term performances – see the performance spanning 5-10 years to make an impression of the funds.
How Less Could I Start My Mutual Fund Investments with?
Mutual fund investments can start with as low as INR 500 monthly through a Systematic Investment Plan (SIP). An SIP is a mode through which you can invest in mutual funds at any of the monthly, quarterly, half-yearly or annual intervals.
How to Open a Mutual Fund Account?
Now you have got two options – whether to open the mutual fund account directly with the Asset Management Account (AMC) or through distributors. Direct association with AMC will not give you access to investment advisories you get when investing through distributors. The return rate can, however, be slightly higher when choosing direct investments through AMC. You can thus decide which way you should open your account.
You need to fill in the details asked in the application form and submit the same to either AMC or the distributor whichever you choose to go with. Post-submission, the AMC will read the details carefully before approving a mutual fund account. For investments, you also need to open a Demat account which acts as a central repository system keeping all your investments in one place.