So, you have money to invest. Congratulations! That’s a great start and now its time to make it grow.
Being a young adult presents some unique challenges when it comes to investing, but also gives you some good opportunities for success. Here are some tips/ideas for young investors out there looking to get started.
# 1. Start Small
Investing is not something you need to rush into. Before you go putting your money anywhere, sit down and make a plan on what kind of investor you want to be and how much risk you’re willing to take (more on that in a minute.)
When it comes to starting small, this can be done several different ways. You could invest one paycheck at a time or open an automatic investment plan where the specific amount changes every pay period (for example: $50 from each check into an index fund.) Another idea would be to set up a weekly deposit into your account via electronic transfer from your checking/savings account for however long it takes until you have enough saved up the next step. Whatever method you decide, just make sure you’re starting small and building your wealth little by little.
Diversification is the name of the game when it comes to investing. It means putting your money in multiple different investment types so if one falls short (or into the ground) you aren’t losing everything.
To diversify successfully, this usually means spreading out your investments among stocks (equities,) bonds/fixed income and cash/cash equivalents like CD’s or savings accounts. Not all of these are guaranteed to make a profit but they will balance each other out over time so when one loses, another gains and overall your portfolio should be relatively stable compared to putting everything in one place. Remember: as much as you may love tech stocks, don’t put all your money in that sector.
#3. Don’t Dip Into Your Investment Account
This is probably one of the most important rules for a young investor to remember. When you invest your money, it should be considered off limits until its time to retire and use that money for living expenses, paying off debts or other financial goals. That being said there are some ways to take out some (not all) of your investments during certain life events without penalty but unless its an emergency and those funds are needed to keep a roof over your head, then generally speaking just leave them alone. The longer they grow, the more they will make so even if its only 5% interest on $1000, over 30 years it will add up and if you screw with that you’re just throwing money away.
#4. Be Prepared to Lose Money
Everyone wants to make money when they put their hard earned cash into an investment but understand that sometimes (more often than not) you will lose some or all of your initial investment before you get a return on your account balance. There are ways to limit the damage such as “dollar cost averaging” where instead of buying a stock/fund at one set price, instead invest periodically over a certain time frame, say one week or month, so if the market goes down during those weeks and prices drop, once its averaged out by buying more units and fewer units in different periods then you can limit the damage. Or you could buy put options, also known as “insurance” where if the price goes down or crashes, you are able to buy back your shares at a much lower than the original price so that overall it counter balances everything else in your portfolio but be prepared to lose some money along with it.
#5. Diversify Some More
As good as diversification is for your investments, sometimes its not enough and depending on how deep into this rabbit hole you want to go, this really opens up a whole new world of opportunities with different types of investment like real estate (aka buying properties,) commodities (gold/silver) or derivatives which is basically betting on certain things whether it be stock indexes, currencies or the weather to either rise or fall.
#6. Be Careful and Investigate Before You Invest
This ties into diversifying some more but just because you see an advertisement with a hot stock tip doesn’t mean its good, even if it has fancy flashing lights (red flags.) In order to invest in something like that (or anything at all for that matter,) always do your research first, ask around, get opinions from other people including professionals and consider checking out sites like therecommendedinvestor.com for some unbiased reviews before you buy into something so you know what you are getting yourself into.
#7. Start Early and Invest Regularly
This goes hand in hand with #6. Don’t wait until you are 30 to start investing because you will lose out on years of growth and compound interest but instead invest the moment you have money. If that means buying dollar bills with your loose change at the end of every day or starting a weekly/monthly savings plan where after every paycheck you put in X amount into an investment account, then do it! The longer those funds are left alone, growing, the more they’ll be worth when its time to retire so don’t delay.
#8. Stay Away From Penny Stocks
Penny stocks are shares for companies that trade for under $1 per share (hence penny.) They’re usually not traded on big stock markets like NASDAQ or NYSE and mostly on the OTC (over-the-counter) market. Unfortunately this is a very high risk, volatile area where some companies are legitimate but just need time to grow, while others are straight up scams and frauds who do nothing more than take your money and run away. One thing to look for is a company that has hired a strong OTC Markets investor relations firm.
#9. Manage Your Money With An Emergency Fund
No matter how much you have saved in an investment or stock trading account, never forget that at any given moment something could happen out of nowhere where you lose it all so try to keep 3-6 months worth of savings in a safe place like a bank savings account (where they will be insured by the FDIC,) where it can’t get taken away from you among other things.
#10. Don’t Be Afraid to Lose Some Money
Investing is filled with risk, volatility and uncertainty but because of that it can be very rewarding as you gain money over time but don’t go in thinking your going to get rich overnight or on some specific date otherwise it will just lead you towards a lot of stress and fear. Losing money is part of the process where if you are too afraid, not ready or simply have other priorities then its better to play it safe than lose everything. You never know what tomorrow brings so don’t take things for granted or think your invincible until its all gone and you’re left empty handed.
#11. Be Careful With Margin Trading & Debt
Depending on which broker you use to invest, margin trading is available where you can borrow money from them to increase your buying power (it will look like the green tick icon on tradinview.) This is different than using a credit card and paying it back with interest because with margin trading you are borrowing money and depending on how the market moves and what you short, if the price rises above your break-even point that trigger stops loss order (which is basically an insurance policy) then they charge interest for borrowing the funds. After all, someone has to pay for those fancy lights/ads they show up in mailboxes of new investors so its better to be safe than sorry.
#12. Be Prepared For Market Crashes
Investing 101: A market crash is where the market takes a sharp drop and goes down in value, usually overnight or over a few days. There isn’t much you can do besides panic sell so its best to just wait it out for at least 3-6 months after they start going back up again before making any hard decisions on your investments. A sign of things to come could be if there are rumors of bad news about companies out there because it will most likely affect their stocks and as a result anything else that gets associated with them like ETFs (Exchange Traded Funds)
#13. Always Think About Your Retirement
In the US by age 70 you are required to have some kind of retirement plan in place, whether that’s an IRA/401k, a pension or just running your own business till the day you die. As long as you are making money in some form then there’s no reason why not to prepare for retirement (unless your really young and have time on your side.)
#14. Don’t Buy A Stock Just Because You Know The Company
There’s nothing wrong with being a fan of a company but when it comes to investing, anything can happen so don’t buy into stocks because you like their products or services otherwise its like playing roulette because sometimes those kinds of companies tank and plummet even if they’ve been around for decades, while others where everyone wants out due to rumors or something else come surging back up overnight. Always make decisions based on facts and history, not opinions and speculation.
#15. Invest What You Can Afford to Lose
Never risk more of your money than you can afford because if all goes wrong then its going to hurt a lot more than if you invested what you could lose without causing too much pain in the process (meaning it will never be life or death for you so don’t panic sell.) Its better to invest than keep saving for years on end especially in this day and age where inflation is high so by investing you’ll actually be ahead of the game versus keeping it in a savings account earning an interest rate barely above 0, which means losing money due to inflation. That’s why many homeless people are also broke even with a steady job because they’re living paycheck to paycheck.
#16. Don’t Invest In Something You Don’t Understand
Never invest in something you don’t understand because it could be a scam or just flat out not worth your time when other options are available at the same price-point which may have more potential or less risk. If you don’t fully understand a situation then always default to doing what 99% of others do, which is nothing at all (because its generally safer that way.) But if all else fails and you really want to buy into an asset/vehicle/investment then at least take another look at it before you make a decision because sometimes the littlest thing can make the biggest difference in how things pan out so its better to think about it a few more times before you do anything.
#17. Don’t Invest in Stocks From the Same Sector
Its best to diversify your portfolio as much as possible and investing your money into stocks from different sectors will lessen the risk of losing all of it, depending on how things pan out. For example, if you invest 100% of your money into Banks then that’s basically like playing Russian roulette because one wrong move could literally wipe you out or at least lose most of it in a blink of an eye so its better to spread them around different regions and asset classes, etc.
#18. What You See Is Not Always What You Get
Don’t trust everything you see when researching a company especially if there are no facts to backup the claims. There’s many ways to manipulate anything on the internet and in this day in age companies have more tools than a mechanic at Jiffy Lube so its up to you, not them as far as what information goes public because all they are doing is marketing their product or service with little emphasis on honesty. Always remember that everything you see online has been manipulated and altered by companies to make it look better than it actually is behind closed doors (which is why its always best and recommended to do your research by looking through the company’s annual reports.)
#19. Never Take Advice From Someone Who Makes More Money Than You
Other people like parents, friends, family etc should never be looked at for advice when it comes to investing because they don’t usually have the tools and knowledge like we do to make the best decisions, especially if its someone who makes more money than you. So it’s always best to get advice from people who know what they’re talking about but just in case get second opinions because no one is perfect and everyone makes mistakes so its better to cover all your bases before making a final decision.
#20. Don’t Invest In What You Know Nothing About
Never invest your money into anything you know nothing or very little about because that means there’s less of a chance the investment will be profitable for you in the long run if anything at all. Sometimes it doesn’t take much research to realize that something isn’t worth your time and money so its best to look for other options that are more appealing to you.
#21. Don’t Invest In Stocks For Long-Term Before Crushing It in the Short-Term
Never invest your money into anything long-term without crushing it in the short-term when everything is still fresh in your mind and not a distant memory 20 or 30 years down the road, like people who invested in AOL back in 1994 because they thought they were buying something that was going to be around forever but as we all know now AOL isn’t even around anymore thanks to better technologies which replaced them over time. So make sure you gain experience with any asset or vehicle before relying on it for long term gains because there’s no sense of putting your money into something you know nothing about and then having it fail 5-10 years later because that’s basically throwing away a key to success.
#22. Beware of the Economy Like It Was Going Out of Style
Learning as much as you can about the economy will play a huge role in determining where your money is best spent because if things are booming like they usually are around here (red hot) then everything should be fine but when things start slowing down or crashing, which is typical in Vancouver especially, its time to move on to somewhere else. The economy will always affect the stock market so make sure you keep an eye out for fluctuations when investing long term because there’s many other places waiting your dollar to supercharge their economy and you don’t want to miss it when they’re at the top of their game.
#23. Always Invest With A Plan B To Ensure You Survive Anything That Comes Your Way
Never go into anything completely blind because that will only set you up for failure no matter how well educated you are on a topic or vehicle. It’s always best to have an idea what the alternative to your primary investment is going to be if something goes wrong, like having enough money saved up just in case $hit hits the fan so that way you can still stay afloat by moving onto plan B even though plan A failed. Most millionaires who failed had all their eggs in one basket which makes sense but not enough sense because there was nothing else for them to fall back onto if their initial investment fell apart. So always make sure you have a plan B to go on just in case something like that happens because even the most experienced investors/speculators still take wrong turns now and then.
#24. Investment Tips Are Never Set In Stone; Always Get Second Opinions for Final Decisions
Everyone makes mistakes so it’s always best to get second opinions on anything before fully committing to it not because someone else will know more than you but they might pass up some bad news about your prospective option which could result in lost profit or an inability to be profitable at all from what you’ve learned, especially when it comes to investing where slip ups can be as as 90% losses or completely wiped out depending on what you’ve invested in.
#25. Always Invest With A Savings Account First And Then Work Your Way Up To Riskier Things
Nothing is more important than your money even if it’s just a few hundred dollars because no one wants to lose their life savings over some risky venture that could fail half the time then become profitable every other time. You always want to make sure you have something for an emergency before taking any risks with your investments because at least you’ll still have a job and your regular paychecks coming in rather than nothing as well as whatever amount of money you’ve saved for riskier projects. At least by doing this, you’ll know once you’re ready to take bigger risks having enough money to fall back on to ensure you don’t become homeless which is an unfortunate reality for many people.
#26. Only Invest In Things You Understand and Which Can Be Easily Communicated With Others
There’s a huge risk in investing in things you don’t understand which can be seen as gambling (a form of betting) because chances are you’re not going to know what exactly your buying into without understanding everything about it first and whatever you can’t figure out should have the “investigate further” padlock attached to the link. Next, make sure that if you do invest in something that can’t easily be explained then take time off from work so you can focus 100% of your attention on learning that one thing thoroughly before moving onto other projects/investments which should make the learning curve much easier and more efficient with time.
#27. Look For Startup Companies With A Disruptive Technology Like Artificial Intelligence, Robotics or 3D Printing
As we all know now, technology is advancing at an alarming rate so to best take advantage of this you want to look for startup companies that have a disruptive technology which can help them get off the ground such as Artificial intelligence, robotics, 3D printing etc because they’re on the cusp of changing our world and becoming ingrained in every industry out there from manufacturing to retail and everything in between. They could be risky investments but will pay off majorly if they work out so try not investing too much in until you’ve done your research and figured out if it’s too risky or not before committing to one.
#28. Try Making Investments In Foreign Countries Where The Risk Is Lower To Take Advantage Of Opportunities You’d Miss Out On Here
Investing in foreign countries is a great way to take advantage of opportunities that would be missed here in the US for whatever reason and can be viewed as low risk because you don’t have direct influence over how things play out unlike certain domestic investments which are 100% in your hands so try taking some time off work to spend several months living abroad and investing while doing this research first to make sure it’s worth it then come back and invest accordingly after a few months. Life doesn’t have to stop just because you started investing more heavily either so feel free to continue living your life like before and just make sure you keep abreast of any news at home while doing this so you don’t miss out on opportunities here.
#29. Don’t Invest In Something You Only Know The Name Of Such As A Company, Sport Team Or Celebrity
Since pretty much all investments consist of something physical whether it be stocks/shares, inventory or real estate etc there’s a chance that the investment itself won’t go up unless you’re lucky which will make things tough for earning that money back no matter how much time and effort you put into making this project successful. So, even if some celebrity is unknown to you then it’s probably best to not invest in them because chances are they’re not going to be worth anything so do your research first before making an investment.
#30. Buy Low, Sell High Only When You Know Exactly What Goes Into Determining The Price Of Something
If you don’t know how to determine the price of something then it’s best not to try and time the market because that’s basically gambling on every purchase, sale or even resale of whatever you buy which will prevent you from earning any money if you can’t predict when prices are going up and down usually. You should only be buying low and selling high when someone else is determining the price because they already put in the hard work required to figure this out for themselves but if there’s no one else involved like at home then it’s best to just hold onto whatever it is you bought until the price goes up which should be a pretty rare event but still happens.
#31. Never Invest In Something You Don’t Understand Such As A Company, Sport Team Or Celebrities
When you don’t understand what you’re investing in then there’s no point and all that’s going to happen is that your investment will fail for one reason or another because you’ll lack the ability to make informed decisions when the time comes so do your research first before making an investment. This doesn’t mean doing research on everything but only things which will actually turn out profitable in the end if done correctly which can be hard to tell, especially with celebrities but also highly unlikely as well so this is best left to other people.
#32. Don’t Limit Yourself To The Stock Market If You Can Help It
While the stock market is still a good place to invest it can be very risky because sometimes they’re not worth anything and if that’s the case then you won’t get any money back. So, don’t limit yourself to just the stock market and look into alternatives such as real estate which actually has some value even if there are no buyers and whatnot so this will keep your hopes up for making money instead of having them crushed like with stocks sometimes.
#33. Invest With What You Have Whenever Possible Except In Special Circumstances Such As This Being Your Only Option To Make Money Or You Need To Get Things Done Quickly
If you want to invest then just use what you have or can get especially if it’s free with special offers which will help keep your cost as low as possible because there’s no point spending money on something that won’t turn a profit in the end. You should only be investing like this when you don’t have other options such as not having enough time to work or make new friends and etc so putting this off is probably going to cost you more than just investing even at a loss since your chance of being successful will go down if your situation doesn’t improve anytime soon.
#34. Don’t Make Investing A Priority Just For The Sake Of It Because There Are More Important Things Like Friends, Family And Yourself
While investing is important it’s not more important than your friends, family and yourself which will be able to help you stay sane during this time of your life. So, don’t make an effort to invest without having these people here for you because that means eventually giving up on them every so often with no end in sight for possibly a long time depending on how much it takes until the investment is successful. It may take awhile but anything worth doing shouldn’t be rushed into just so someone can get something done immediately in their eyes.
#35. Never Invest If You’re Being Pressured Into Doing So By Anyone Be That Person A Friend, Family Member Or Even Stranger On The Street
For some reason or another there are people who will try to make you invest in something, especially stocks, which they want for one reason or another and just because someone wants it doesn’t mean you have to give them what they’re asking for if that’s the case. It’s usually a bad idea to do so without thinking about how this is going to affect your life instead of theirs because no matter what their reasons are it’s still going affect you more than anyone else even if it turns out well in the end. So, don’t listen to anyone who tries to pressure you into doing something such as investing unless they have good enough reasoning behind why you should do this such as having thousands of people wanting it which seems like an exaggeration but isn’t all uncommon.
In conclusion, there are many ways to invest and some may be more profitable than others but these are still very legitimate so it’s best to try your best with what you know. Don’t go into this blindly because that means trying out every single option which isn’t going to happen unless you have unlimited funds available which will also hurt your chances of having success as well.
Also, don’t forget for me and everyone else reading this that investing is always risky no matter who tells you otherwise or how easy they make it sound since things are never a sure thing. So, just remember that anything can happen even when everything seems fine in the end so prepare ahead of time for any situation possible no matter how weird or unlikely they seem at first glance.
Thank you for reading this article! I hope that everyone has learned a lot about investing in all the different forms available to them and will put some or all of these tips to good use while having fun at the same time. I know it can seem tough sometimes but there are always ways to make things easier with enough work so don’t let anyone tell you otherwise. Also, if you want more then check out my Twitter since I post interesting articles like this often on there. Thank you again for reading this article and have yourself a great day ahead of you!