Where and how should one invest in their 20s?

What kind of investments would you suggest for someone in their 20s?
-Rochelle

If this is the money you can invest and forget, somebody in their 20s who is venturesome can start even with a small-cap fund. However, there's something which one should keep in mind. These funds prove to be the most rewarding asset category over a very long time, but in the worst of times, they are in a free fall, which is quite unnerving. During the 2008 crisis and a few other phases after that, they quickly declined in value by 50 per cent in a brief period. It is something like your Rs 100 becoming Rs 50, which most investors are not used to. So be aware of that.

But here is a more methodical approach to investing in your 20s. If you earn and pay taxes, estimate your tax-saving investment requirement and invest that amount in a tax-saving fund. There are great tax-saving funds available for Indian investors. For the remaining money you can save, start with a flexi-cap fund. If you wish to assume greater risk as you are in your 20s and still have 40 years to work, you can even be investing in small-cap funds.

This article was originally published on March 22, 2022.