My son has just begun his professional journey and I would like him to start investing. What is the best investment strategy for him?
I think the most important thing to do at this stage is to just get started and not keep waiting for a perfect financial plan. There are broadly just two-three things that he needs to do. One is that he should invest in one-two good ELSS funds to the extent he can derive tax exemptions. Beyond that, he should look at investing in aggressive hybrid funds because these funds have a certain portion of their money invested in debt securities which help cushion the downside at times when the markets fall. This could be really valuable for a new investor in getting used to the ups and downs of the equity market and not exit in panic.
Other than that, I believe, he should buy a health insurance plan if he already does not have one and he should buy a term insurance the day he has financial dependents. He should also look to build a certain buffer or a certain contingency fund for himself over the next few months. Presuming he does not have many financial liabilities on him at the moment, keeping a buffer for three-six months should be a good enough contingency reserve. He can continue to maintain it in his bank account for now.
Once he has done all this, he should focus on just being at it and keep investing for the next two-three years at the very least, without thinking too much about the ups and downs of the equity market or getting too unnerved by sharp market falls which may happen anytime during this while. It's after two-three years, when he has familiarised himself a little bit more with investing, when he should consider building a more nuanced financial plan for himself. So I would advise that at this stage, the most important thing is to get started, because otherwise, there are a lot of temptations to spend your earnings at the start.