Starting to invest at 25? 4 simple steps to build your financial roadmap

For 25-year-old first-time earner Rony, starting his investment journey can feel extremely overwhelming, especially when the markets are volatile, and considering that his risk appetite is low. With no experience navigating the market cycles, the biggest challenge is not chasing returns but building confidence without taking on more risk than he can handle. A simple, disciplined approach can help him start investing without getting hassled by short-term market swings – but the point is where and how to start, and what the roadmap should be.

A pure four-step formula can put Rony’s finances in order, Shashank Udupa, SEBI-registered research analyst, asserts

Build an emergency cushion first

Keep around 12 months of expenses in a liquid fund or sweep-in FD. “This money will buy him the ability to leave the rest of the portfolio alone during a fall,” Udapa says.

He can also keep 4–5 months of this money as a tactical buffer to invest gradually when markets correct

Get insurance in place before starting your SIPs

Term insurance and adequate health insurance should come first. A major medical emergency can wipe out years of savings far faster than a market correction.

“Also include cancer riders in the bill because I have personally seen my friend’s wealth worth 1 crore gone in cancer treatments”

Goal-based investing

Rony should allocate his investments based on when he needs the money, not simply by the product name.

For goals within 0–1 year, he should stick to liquid or low-duration funds.

For 1–3 year goals, he can consider short-duration or corporate bond funds, while arbitrage funds may be an option for investors in the 30% tax slab.

For 3–5-year goals, he can keep around 60–70% in debt and the rest in equity through a simple index fund or a balanced advantage fund.

For goals beyond five years, he can take a more equity-led approach as there is enough time to ride out market volatility.

Keep investing simply and review it just once a year

“One SIP, one review a year. Rebalance on a calendar date. I would add one habit,” the expert says.

Also, Rony should try tracking the real return, that is, what he actually earns after accounting for taxes and inflation.

For example, for a 30% tax-slab investor, a 6.25% FD return against 4.38% inflation can effectively leave little to no real return.

“Once you calculate that number every year, you stop asking whether a product is safe and start asking whether it is doing its job”