One of the most frequent advices that can be given to the youth when it
comes to investment is starting young. And just because, the advice is
so frequent, most of us tend to forget that it is actually the BEST
advice anyone can be given.
Why is starting young so important? The answer is hardly rocket science.
By the sheer luxury of time that youth has on hand in terms of the
period of investment, the risk appetite is multiplied several times
which in turn leads to investments that by design are high risk, high
returns. At a simpler level, starting young means you have a lot scope
for distributing your investments over a long period of time, ultimately
leading to a substantial increase in the net amount invested. At a
still simpler level, starting young means your money has that more time
to grow and hence, higher returns.
The Anti-Inflation Investment—Real estate investments are an almost
guaranteed way to get around inflation. Real estate is growing market,
more so because of the rapidly shrinking supply of land. You only have
to go house hunting in a city like Mumbai to know the extent of land
shortage in the country. A shortage supply logically means a growth in
market and so long as this shortage persists, the market shall not slow
down. The core point here is a careful market research before investing
into the real estate. You can hardly expect your money to grow
exponentially if you chose to invest your money in a landed property in
remote UP. It shall still grow but not as much as it would in a more
favorable location like Mumbai or Delhi-NCR. There are other
considerations too, which need to be taken into account. For
instance, in cities like Pune and Gurgaon, which thrive on floating
population, investing in residential properties that can be leased out
at a later stage is a good strategy.
While this common wisdom has had many young investors coming into the
market, investing largely in equities and debt instruments , real estate
continues to be an area out of the purview of the obvious choice of the
investors. Going by the volatile nature of the economy these days
however, real estate has rapidly emerged as a mode of investment that
should ideally be on the top of the investment priority list, especially
for the young investors. We give you a lowdown on the reasons why real
estate should be preferred by the youth.
Tangible Asset—This is not exactly an objective benefit but may hold
significant importance in several cases. Unlike old times when owning
house marked a definite landmark in one’s life, young investors can now
enjoy the benefits of a tangible asset pretty early on in their lives.
If the property is a residential one meant for personal purposes, the
obvious benefits are manifold. In several cases, the investors’ end up
paying an EMI which is only slightly more or almost equal to the rent
they would be paying otherwise, with an added benefit of actually
residing in their ‘own’ place.
Affordable Option—Yes, you read it right. Contrary to the popular
perception, investing in real estate is actually one of the more
affordable options with banks funding up to 80% of the cost. The young
investors also get income tax benefits. A slightly more complex benefit
is derived from the fact that young investors are expected to pay fixed
installments over years which in effect amounts to purchasing an asset
at a lower cost, whose value is bound to appreciate while the investor’s
own income too keeps rising. For those young investors looking to
discipline their investments, servicing regular EMIs is an excellent
method. Of course, real estate is a volatile asset but from a reasonable
perspective, it is still a
safer bet than stock markets, especially when trade pundits across board
have been reiterating the fact that the probability of appreciation in
case of real estate investments is very high.
As we had stated earlier, real estate is a volatile option, even if
relatively less so. And hence, the prudent way ahead is to make real
estate one of the modes of investment in your portfolio and not the only
one. An ideal portfolio has a balanced distribution between various
options and irrespective of the benefits or the risk factors,
concentration of wealth in any mode is problematic. The ideal way ahead
is to start off with SIPs (systematic investment plans) and gradually
proceed to real estate, as and when you reasonably acquire enough spare
wealth to distribute between various investment options. The key is to
be prudent with your money and invest as soon as you possibly can. And w
hile investing in real estate, always remember, an aware investment is
the only safe investment and a thorough market research is a must.
