Many people begin saving and investing too late into their adult years. They think they have plenty of time to begin; however, starting when you are young has many benefits. Investing is considered to be the first step to financial freedom!
Starting to invest when you are young can yield high results for future monetary gain. While emerging into new territory and gaining a new skill can always be anxiety provoking, doing so with money can have serious consequences coupled with high reward. Young investors will inevitably make some mistakes along the way; however doing so at a young age offers the flexibility to quickly recover due to future generated income. The style of investing a young investors engages in ultimately depends on their financial goals, including but not limited to:
· Paying off student loans
· Buying a house or car
· Planning for children’s college tuition
Mutual funds offer a ready-made diversified portfolio, balancing investments among several stock, bond, or additional money making asset options. This is a good option for small investors as the portfolios are compiled from professionals and are not considered a high-risk investment. A multitude of mutual funds are available to browse for free. Many sources discourage young investors from placing too many risk-free assets.
At the same time the young investor has the best opportunity at this age to develop a portfolio, that can lead to a bigger portfolio later on, by engaging in higher risk investing. A long-term goal, such as planning for retirement, offers the best opportunity when starting at a young age.
Stocks offer a higher risk and therefore the opportunity for faster monetary gain. Researching prior to placing assets in a particular area is essential to avoiding common early mistakes. Additional resources for the emerging investor can be found through simple searches online. There are many resources available offering young investors the opportunity to link to financial banking, set up a brokerage account, plan for retirement with an Individual Retirement Account (IRA), or find tools to get real time stock quotes online.
An added bonus is that responsibilities for young investors, such as family, spouse, mortgage, etc., are not as burdensome; therefore small portions of income can be allocated to higher risk investments that will ultimately yield a higher return.
Diversify, Diversify, Diversify! Selecting stocks across a wide array of types of market categories allows for a balanced portfolio. This way if one of the allocated investments tank, the portfolio is not at risk of putting the owner in financial jeopardy. This means taking some conservative stocks, some with long-term growth potential, along with the high-risk investments.
For the visual learner these top tips for early investors offers clear graphs to illustrate many of the topics previously discussed.
Ultimately the earlier you are able to invest the better. Taking higher risks, while it may be intimidating, will yield a greater return in a shorter timeframe. The first step is learning about financial options, and exploring the different opportunities that are available to a young investor. Time is on the young investors side, if they choose to take it, so the bottom line; start saving and investing as early as possible.