Investing is the best way to build your wealth and secure a comfortable future and financial freedom. It is a way to make money as you have to invest to make more money.
You are never too young to start investing, in fact, it most ideal to start investing at a young age when you don’t have many financial needs.
According to financial experts, the right time to start investing is during or after you complete your graduation which is around your 20s.
Young investors have the potential to yield the highest returns as they can conquer market volatility.
In this article, we will be discussing the perks of investing from an early age.
1. Earn Higher Return Through Compounding
Investing early puts you in a better position to gain higher returns through compounding. Compound interest is the interest earned on interest, so, the money that you invest will make interest and the interest will generate its interest, making you earn more returns. It is the growth achieved on growth.
You will gain more by continually reinvesting your returns, making your investment grow further. The longer you keep compounding interest, the more your money will grow.
With compound interest, you can gain 4X the amount you invested, and you can achieve this by starting early.
2. Better Risk Tolerance
No lie, in this volatile economy investments, are risky, they have ups and downs. But as a young investor, your risk tolerance is much greater as you have more time to learn and withstand any risk factor.
As you progress in your career you will be able to make up for all the risks you encounter and continue to build a strong portfolio.
Young investors can take on aggressive portfolios that bear much risk with less fear as they know that their investment failures will not entirely affect them but will be a valuable financial lesson.
This is not the case with older investors as they are much more conservative and prefer stability so, they try and avoid high-risk investments as best as they can.
3. Improves your Spending Ability
Investing from a young age will automatically improve your financial discipline and will teach you financial independence.
This means that saving will not be that difficult for you and you will be much more aware of what you spend your money on.
Having fixed savings will have you follow a budget, wherein you cut out unnecessary expenses and take the money into your savings or investment.
You will develop a saving habit that will potentially improve your spending habits.
4. Secured Future
As you progress to adulthood, so many things will change, and this might also affect your finances.
There will be instances where you need money urgently and the investment made by the younger you will come in handy, getting you through the tough times you will be facing.
You won’t have to get yourself into debt by borrowing or taking out loans as your early investment will be there to rescue you.
Your early investment can also be used for your retirement.
5. Tech Knowledge Comes in Handy
A young investor is much more tech-savvy and most likely to be aware of the many platforms available to learn and understand more about the best investments and key factors to note in investments.
With the help of technology, you will be able to invest in avenues that will yield great returns.
An investment with thorough research can give you confidence and assist you in making bold decisions as you progress in life.
How to Start Investing and What you Can Invest In
Now that you know why you should start investing at a young age, I am sure you are wondering about where to start and what you can invest in.
Don’t worry, we’ve got you covered.
There are various products that you can invest your money in with some being:
- Real Estate
- Money Market Fund
- Mutual Funds
- Certificate of Deposit (CD)
- High-yield Savings Account
- Exchange-traded Funds (ETFs)
Also, there are reputable companies and applications that you can check out and start investing with. You will have to do your research on what the best product to invest in currently is and if you will be going for stocks, weigh your options properly as some companies have the potential to grow while some are risky to go for, considering the volatile economy.
Remember, you are never too young to start investing, the younger you invest, the richer you get! Start investing today, your future self will be thankful for it.
The little money you invest from a young age will make a huge difference in your pocket in the future.
Investing early means peace of mind as your future will be secured and you wouldn’t have to worry about money or getting into debt trying to make ends meet.