Investment Options For Millennials In 2022 – Forbes

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Simply earning money and keeping it idle in a bank account or just saving your hard-earned money may be sufficient to meet your long-term financial goals. Investing your money can help potentially beat inflation and generate positive returns over a period of time. 

When it comes to millennials, they come across as more risk-taking compared to the Gen X generation in matters relating to investing in financial products. However, a high-to-medium risk instrument may not always offer high profits and vice versa and that makes it critical for millennials to invest prudently.

Here are the top investment options for millennials to consider investing keeping a balanced financial corpus in mind. 

Public Provident Fund (PPF) 

It is important for millennials to understand that starting early and remaining invested for the long term can help generate wealth by reaping the benefits of the power of compounding. Millennials can generate a huge corpus over a long-term horizon if they plan and execute consistently across well–researched asset classes. The way PPF works is simple: 

  • Investment in PPF is considered suitable for all investors across all age groups. 
  • One can start as low as INR 500 in a financial year. 
  • PPF provides benefits of steady interest generation and tax saving investment benefits. 
  • The interest generated through PPF is tax free and is determined by the government and the limit of the deposit in PPF is INR 1.5 lakh per annum. 
  • This is one of the investment vehicles where investors can garner the benefits of the power of compounding. The interest gets compounded every year and is credited at the end of every financial year.  
  • It has a lock-in period of 15 years and investors can extend this investment span by five years.
  • As the investment is not market-linked, it offers guaranteed returns to protect the investment needs of many people, and thus, is safe for millennials. 

So it’s prudent for one to start investing some money now and be consistent for a financially secure future. 

National Pension Scheme (NPS) 

Regulated by the Pension Fund Regulatory and Development Authority (PFRDA), NPS is a government-operated scheme. It is a diverse investment option that ranges from corporate bonds, government bonds, equity and fixed deposits.  

As a millennial, whether you are still an associate working at a mid-management level or senior position, saving and investing is quintessential. 

  • The sooner one starts, the better, because investing in 20s and 30s gives one ample time to build a diversified portfolio, which further means better returns. 
  • When it comes to retirement planning, an NPS investment appears to be more relevant for millennials than other investment instruments, as the government has made some positive revisions in the scheme. 
  • One can start investing with as low as INR 500 and in different asset classes such as equity or debt and government securities at low expense ratios. 
  • Investors can also claim tax benefits up to INR 1.5 lakh under Section 80C of the Income Tax. 
  • The NPS also allows additional tax exemption of INR 50,000 under sub Section 80CCD (1B). During redemption, investors can redeem a certain percentage of the corpus and can redeem the remaining corpus as monthly pension after retirement. 

As compared to other investment options, NPS has comparatively low risk. Being a government-owned scheme, the risk capping ranges from 50% to 75% on equity. For older millennials, the risk exposure is around 75%, which reduces as investors reach the age of 60 years. Investing in NPS helps one maintain discipline, brings consistency, and also allows access to higher-earning opportunities with lower risk. 

Mutual Funds (MFs)

These are considered relatively safe and lucrative financial instruments and are hence gaining popularity among Indian millennials. Millennials can supplement investments in fixed interest options such as fixed deposits (FDs) and public provident funds (PPFs), NPS and other investment categories by diversifying their investments via mutual funds. The way mutual funds work is simple: 

  • Several investors pool their money together, which is managed by a fund manager. 
  • This corpus is invested in debt, equity and other asset classes like hybrid, thematic funds. Mutual funds offer opportunities for a diversified portfolio, stable returns, liquidity and low costs. 
  • Whether one wants to save for a short-term goal or a long-term one, mutual funds can fulfill both purposes. 
  • One can choose from lump sum investing or taking the systematic investment plan (SIP) route. 
  • The SIP route is preferred as it gives investors a disciplined approach and beats market volatility. 
  • MF also offers an opportunity to invest in the global market through various overseas funds and Exchange Traded Funds (ETFs).  
  • Mutual funds are managed by fund managers, and investors should review the mutual fund portfolio every six months or once in a year. Moreover, the invested amount can be debited at regular intervals as chosen by the investors. 

Millennials can also take advantage of the Equity-Linked Savings Scheme (ELSS) category, which includes a dual benefit of wealth accumulation over time and tax deduction. Investing in ELSS offers tax-saving benefits up to INR 1.5 lakh under Section 80C of the Income Tax Act. The ELSS mutual funds have a lock-in period of three years, which is the shortest lock-in period amongst other investment options, and offers returns higher than fixed deposits. After the lock-in period is over, investors can choose to redeem the funds. 

Among key points to remember when choosing a mutual fund to invest in is that they are subject to market risks and one should carefully analyze the risks involved and then choose to invest in a fund as per one’s financial goals and risk appetite.  

Direct Equity Investment

It would be safe to say millennials are tech-savvy and well-connected globally. Investment in capital markets and stocks have gained popularity in recent times, and such investment can help them grow their wealth as direct equity investments are directly aligned to the goals of the investor. 

  • Millennials should have a sound understanding of financial markets before choosing this method, owing to the risks associated with market volatility.
  • The key word here is being systematic – sticking to a well–aligned method that makes the equity market a lucrative asset class. 
  • There is no room for reckless buying and selling based on a random tip. 
  • Ideally, the investors should be guided by a wealth management advisor or should do a thorough study before investing in a particular stock. 
  • They should focus on building a diversified portfolio incorporating multiple asset classes to generate optimum risk-adjusted returns. 

It’s important to ensure that one takes a periodic review of the investment portfolio and financial goals to modify the portfolio according to the changes in the market, as well as their own risk appetite, age, and financial goals. When the market is fluctuating, one may need to adjust their investment amount based on market conditions and risk appetite. 


As the Covid-19 pandemic struck, health and life insurance plans came into focus. When it comes to planning for the future, it could be prudent for millennials to prioritize health insurance as a way of shielding them against unforeseen circumstances in the face of responsibilities. 

  • Investing in insurance provides dual benefits: Safety for unforeseen circumstances and tax benefits. 
  • The premiums that individuals pay towards an insurance policy are eligible for deduction up to INR 1.5 lakh. 
  • The cost of a life insurance premium often depends on risk. A healthy and young millennial is generally considered lower risk for a life insurance company, and therefore, more likely to get an insurance policy at a comparatively lower premium. 

Additionally, millennials may tend to take insurance plans for themselves and families including old parents to safeguard from any emergencies that might arise. Regardless of whether one is young and healthy, or whether one has dependents, planning for the future and any unforeseen events or emergencies must be an utmost priority for all. 

Bottom Line 

A research-driven approach to investing combined with discipline can go a long way in ensuring one’s wealth creation journey is safe and yields results. In recent times, millennials have been seen to become more cautious towards finances and realize the value of investing. 

It is important for millennials to carefully analyze all the investment options and then invest based on their financial goals, risks involved and liabilities. Timing is one of the major factors to consider while investing. 

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Saurav heads the wealth management business at Tata Capital. He has more than 20 years of experience in the financial services sector. Prior to joining Tata Capital, he worked with Citibank and Philips India. Saurav is an alumnus of Indian Institute of Management, Lucknow and National Institute of Technology, Suratkal.

Aashika is the India Editor for Forbes Advisor. Her 13-year business and finance journalism stint has led her to report, write, edit and lead teams covering public investing, private investing and personal investing both in India and overseas. She has previously worked at CNBC-TV18, Thomson Reuters, The Economic Times and Entrepreneur.