If you are reading this article chances are you think you are too young to invest. You also probably think that you do not have enough money and that you lack the necessary business skills needed for investing. The truth is, most people need investing as a way to safeguard their future.
For those of who are still on the fence, it is important to remember that your investing journey does not start with your first deposit, it starts with your first initiative to learn about investing. But why exactly do we need to invest and if ever, how can we start?
First Reason to Invest: Compounding Interest
There are two main reasons to invest at a young age. The first one is compounding interest. The earlier you start investing the more your funds accumulate. Investing is all about making your money work for you and the sooner your money works, the sooner it multiplies to create more money which will in turn create money thereby creating an endless cycle of wealth creation.
For example, If we assume a starting capital of PHP 10,000 and a compounding interest rate of 4% per annum and let’s assume that you start at age 25, by age 70 your investment will be worth PHP 58,412 amount. However if you keep the interest rate and the starting capital constant but instead start at age 15 your investment will be worth PHP 86,464 once you reach 70. Of course this is an oversimplification and you probably won’t have the same funds when you are 15 and when you are 25 years old but try it out for yourself with values that you think are realistic.
Second Reason to Invest: Risk
The second reason is your ability to take risks. Adults typically don’t have the appetite for risky investments the same way young people do because adults have responsibilities to their family. Therefore, by the time someone starts a family, a person’s investment philosophy should be about safeguarding the future and capital protection as opposed to significantly multiplying their net worth.
On the other hand, you being young, can take on more opportunities with your desired amount of risk with minimal downside. With this, you are more likely to learn from your mistakes earlier and start being profitable earlier.
How to Start Investing
So how exactly can you start investing? You don’t have to go to Business School, you don’t even need to go to college to invest. In the digital age all it takes is 20 seconds. All it takes is 20 seconds to follow people in the finance world on Facebook, Twitter and on YouTube. This seems like a small thing but when you see finance on your timeline, it encourages you to learn more about finance and investing. In a way, you’re planting these small ideas into your mind which will eventually turn into your drive; into your passion for investing.
But let’s say you want something more actionable, what can you do? One of the most practical things that someone can do is to allot a certain amount of time to learn about investing. This can be done an hour per week or an hour per day; it depends on your schedule and how quickly you want to learn about investing. All you need to do is to look up basic terms like “interest rates”, “investing”, “capital”, and “compounding interest” and eventually, you will never run out of things to look up.
However it is important to have savings before applying your learnings on investing. Being young does not give you an excuse to be reckless. You still have to employ risk management strategies as well as to have a “cushion” just in case your investment doesn’t go as planned.
if you still don’t know where to start you can head on to InvestaUniversity, a free stock market program filled with activities, a welcoming community, and instructional videos all geared towards helping you make that first investment and eventually, financial freedom.
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