Millennials are those born between the years 1980 and 1995, also referred to as generation Y. The people born between 1996 and 2010 are called generation Z. Accumulated together, they form the major population which lies between the ages of 27 to 37.
According to the records, 40.7 Crore Indians were falling between the age group of 18 to 36 in the year 2016. Also, it was recorded that population of the millennial was the world’s largest at 400 million. Also, the power to spend is projected to be INR 33000 crores by the year 2020. Additionally, most of the spending is directed towards investments. However, this generation does face certain issues.
Listed below are 4 major issues faced by today’s millennial generation:
• Saving for Retirement:
When you start working, more of your salary goes in spending and less in savings. However, as time progresses, you tend to save more and cut down on your expenses. You start a family and have to cater to their needs too. On the other hand, when you start working you will start saving at least 50% of your income, and you will not need to cut down on your expenses as there will be enough to spend and you will also have a substantial amount of savings.
For example, an investment of INR 10,000 per month which is saved for 20 years would give you a return of roughly 1 crore (considering interest on investment is 12%).
This will give you an amount of 3.5 crores on maturity. Hence, if you invest this money when you start earning, then it will make a lot of difference after 20 years. Also, you must keep in mind the retirement rule of 30:30. This means the 30 years of your earning period should be able to support the 30 years of your non-earning period. You can also opt FD Investment plans for saving for your retirement this is very ideal and best option for savings.
• Risk of Investment in Stock Market:
Investment in any kind of asset class has risk involved in it. The risk can be marginal or a high-risk project. You may get an income from the investment, but lose the purchasing power even if the investment was backed by the guarantee of the safest sovereign agency. A specific goal in life should not hamper your decision of understanding the nature of risk for investing in equities or non-equities. Else, there will be no fruitfulness in choosing a non-equity asset class for every goal in life.
The only risk involved for investment in equities is of taxation and inflation. However, there is one thing you should keep in mind that you should have positive returns after tax and inflation. Debt and equity are different assets which have to be taxed differently. However, investment in equities is prominent in most cases in order to meet long term goals even though they are highly volatile.
Though, the volatility of investment reduces over time if there is a proper renewal of performance. Studies have proved that in long-term, there have been returns from equities which have the potential to deliver inflation adjusted returns which are higher. On the other hand, other investment options are mainly used for conservation of capital.
• Investment in SIP Mutual Funds:
For investing in a Systematic Investment Plan (SIP), proceeding with a financial plan in place and considering all the elements is advisable. You must note that investing in any source must have financial back up in order to meet your financial goals. The amount of money you need and the time you will need it at are guides for investment strategies.
Investing in SIP’s have been taken up tremendously by Indian investors. By investing in SIP’s, the pull of investing in any other market avenue is reduced and helps in making disciplinary investments from time to time
• Financial Planning for Child:
When you have a child, your family obligations will increase and hence you will also have to plan for your child’s future and his expenses. You will have to plan for things such as money for marriage too. If you start early, then you will be able to save enough for your child’s future.
You should prepare to meet financial needs at an early stage so that you do not make any abrupt investment strategies or hasty financial decisions.