For many, 22 is a good age to get started with their first job or a couple of years in, so it's a convenient time to develop the tools of investing. When people are 22 years old, they can either invest in a conservative manner or opt for a more aggressive strategy depending on their comfort level with risk.
This guide explains in detail the Top Investment Plan for 22 year-olds into two tiers: the Beginner Plan and the Aggressive Plan, where investors are willing to accept a greater risk for greater gains. If you just want a simple list of investment plans for 22 year old options, or you're undecided whether to be cautious or appreciative, this should provide you with a good starting point.
Best investment plan for a person of age 22 in India
Since there are many investment plans available, let's categorize them into two plans: a Beginner Plan and an Aggressive Plan, depending upon the level of comfort with risk.
Beginner Plan
1.Nifty 50 Index Funds
These funds are a low-cost, passive way of investing in the Nifty 50 Index, the top 50 companies in the Indian market.
Strengths
A simple, easy to understand introductory option for an investor who has never invested before.
Long runway ahead to benefit from compounding.
Low expense ratio compared to actively managed funds.
Risks
No risk of losing money during market corrections.
Returns are only as good as the returns that the index itself provides, and can't be beaten.
Best For A 22 Year Old Investor Who Wants Simple and Cheap Exposure to the Best Companies of India as a First Investment. Expected Returns The broad range of 10 to 12 percent annually with variations depending on the market. The Flexi Cap Funds are one of the types of funds where the investor does not specify the weights to be allocated to large cap, mid cap and small cap companies and the fund manager can take decisions on the allocation of weights according to the opportunity. Strengths The flexibility of fund managers to adjust their strategies according to market cycles. The adaptability of fund managers to market changes. A pretty good compromise for a new player who isn't satisfied with just big caps. Risks Performance is a critical function of the fund manager's allocation decisions. May have a higher volatility than funds with broad market exposure. Best For A 22 year old who wants to diversify from only index funds to not go into higher risk categories. Expected Returns 10-13 percent per year, over the long term. Mid Cap Funds are stocks from mid size companies, which have higher growth potential than large caps, but are also more volatile. Strengths Higher Growth Potential than Large Cap Focused Options. Young age gives time to recover from the short term volatility. Experience in exposure to companies at an earlier stage of growth. Risks More volatility than large cap or index funds. May under perform heavily during down markets. Best For A young investor in early 20's who wants to include a touch more upside in their overall beginner portfolio. Expected Returns 12-15% per year, but are highly market dependent. Gold ETFs offer investors the opportunity to invest in gold without owning physical gold and trading it on an exchange, similar to a stock. Strengths No storage issues as with physical gold. Provides protection against inflation or market volatility. A trading account is easy to open, and easy to trade. Risks Prices of gold can stay stagnant or go down for a long time. Does not produce a stream of income as do dividend paying assets or bonds. Best For A 22-year old who wants to diversify a beginner stock portfolio that's mostly made up of stocks. Expected Returns Vary from year to year and are generally in the range of 7 to 9 percent per annum, but this is much dependent on market cycles. Even if an aggressive plan sees the bulk of the portfolio in higher risk options, Index Funds can be used as a core low cost holding. Strengths Provides a foundation to build higher risk bets around. Eliminates the need to actively manage a part of the portfolio. Low expense ratio and reliable long term performance. Risks No protection if the market drops. Limits returns to index returns. Best For A 22 year old with a need for a reliable center holding with a drive to more aggressive growth in other areas. Expected Returns 10 to 12 percent per year, on average. Small Cap Funds invest in small companies with high growth potential but are very volatile compared to large and mid-cap funds. Strengths Highest growth potential among equity fund categories. Sharp down-turns can be recovered from with a long time horizon. A chance to be exposed to growing companies. Risks High volatility, expect big drops when markets correct. Can become underperformers for long periods of time versus large cap options. Best For Investors who have a high risk appetite and aim for long-term growth, and have a high risk tolerance with a long time horizon, such as a 22-year-old person. Expected Returns In the range of 13-17 per cent per annum in total (this is subject to variation, and not guaranteed). Exposure to the markets of other countries (US or other countries) is provided through an ETF that trades locally. Strengths Exposure to sectors and companies which are not present in the country. Minimizes reliance on only Indian markets to perform. Diversification beyond the Indian market Risks Exchange rates may impact returns. International exposure rules may be more complicated in the regulatory and taxation aspects. Best For A 22 year old investor who seeks global diversification as part of an aggressive, growth-oriented investment portfolio. Expected Returns Differ depending on the index and how it moves in currency, and is not fixed. Be realistic about your risk tolerance; an aggressive strategy will only make sense if you can tolerate the severe declines and not panic sell. If you're new to investing, begin investing with a beginner's plan, and gradually move up to more aggressive options as you get more confident and knowledgeable. No matter what you decide to do, diversify, as gold ETFs or international ETFs can help lessen reliance on a single market or asset class. Be consistent with contributions since it is the frequency of investment that is more important at this age than the amount invested at any one time. Don't confuse short-term needs with long-term investments; cash that you need in the next couple of years shouldn't be invested in something that's more of an equity, such as a small cap fund. The best investment plan for a 22-year-old will vary from person to person, depending on their risk tolerance and comfort level with fluctuations in the market. A Beginner Plan that focuses on index funds, flexi cap funds, mid cap funds and gold ETFs is a good starting point, whereas the Aggressive Plan is more of a tilt towards small cap funds and international ETFs for those that can tolerate higher volatility in exchange for possibly greater growth. Regardless, the most important thing for 22 is time. It is more advantageous to begin investing from a young age (say 22) with even a small, regular investment plan than to wait and invest a larger sum at a later time.2.Flexi Cap Funds
3.Mid Cap Fund
4.Gold ETF
Aggressive Plan
1.Index Funds
2.Small Cap Funds
3.International ETF
Comparison Table: best investment plan for 22 year old
Factors To Consider Before Choosing An Investment Plan
Conclusion