Young Investing: Making Your Money Work for You

Whether you’re just starting your career or studying in university, investing your money is a crucial step towards securing your financial future. You might think that investing is reserved for the wealthy or experienced, but that’s not true. With some basic knowledge and a bit of discipline, you can begin your investing journey today.

Why Invest?

Before we dive into the “how,” let’s briefly talk about the “why.” Investing is a way to grow your wealth over time and secure your financial future even when you are not earning thousands of pounds yet. Instead of letting your money sit idle, investing allows it to potentially earn more money through various avenues, and accumulate in value with smart money decisions. While there are risks involved such as forex scams and making bad investing moves, investing wisely can lead to financial independence, achieving your goals, and even retiring comfortably. However, trading forex isn’t that easy so you may want to read a forex trading guide to learn the ropes. 

Start with the Basics

1. Set Clear Financial Goals

Defining your financial goals first is foremost. Whether it’s buying a car, owning a home, or building a retirement fund, plan out what you want to achieve financially from investing in the short and long term. Having specific goals will guide your investment decisions, and will also stop you from making poor financial decisions such as splashing your cash on a luxury holiday.

2. Create an Emergency Fund

Before you start investing, make sure you have an emergency fund with 3 to 6 months’ worth of living expenses. This acts as a safety net, so you don’t have to dip into your investments during unexpected situations. With COVID-19 in the last few years bringing us unprecedented times, it is easy to forget how the unexpected may lie ahead and we should all be prepared for it, no matter how young!

3. Pay Off High-Interest Debt

 If you have high-interest debts (like credit card debt), focus on paying those off before investing all of your money elsewhere. The interest on these debts is usually higher than potential investment returns, and if left unpaid you will find yourself struggling to be accepted for things such as a mortgage.

Understanding Different Investment Options

Stocks

When you buy a stock, you’re purchasing a small piece of ownership in a company and hoping that its value increases over time. Stocks have the potential for high returns but also come with higher risk. Diversify your investments across different industries such as in property and other physical assets to reduce risk!

Bonds

Bonds are essentially loans that you give to companies or governments. In return, they pay you interest over time and return your initial investment when the bond matures. Bonds are generally considered safer than stocks but offer lower returns.

Mutual Funds

Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other assets. They’re managed by professionals, making them a good option for beginners.

Exchange-traded funds (ETFs)

Similar to mutual funds, ETFs consist of a collection of assets. They’re traded on stock exchanges, offering flexibility and diversity. With more complicated investments, it would be wise to enlist the help of a financial advisor if you are not familiar with the industries.

Property 

Investing in property involves buying properties and earning rental income or capital appreciation. Real estate can be lucrative, but it requires substantial upfront capital and knowledge.

How To Get Into Investing When Young  

Educate Yourself

Read books, and articles, and watch videos about investing. Try to avoid salespeople who claim you can be a millionaire by the age of 20 if you pay for their training course. They are usually fake, and simply trying to make sales. Use real educational platforms, and also go to seminars to help. Understanding the basics will help you make informed decisions.

Start Small

You don’t need a lot of money to begin investing many platforms allow you to start with as little as £100. As you gain confidence and experience, you can invest more and make higher-risk investments. Just try to invest safely whilst you are starting.

Choose an Investment Platform

Look for a reliable investment platform and avoid scamming websites that take the money off investors and never show up again. Opt for regulated platforms that are protected by the financial conduct authority. Consider factors like fees, ease of use, and the variety of investment options offered.

Diversify Your Portfolio

Don’t put all your money into a single investment as this will make even the simplest of investments a high risk if everything goes wrong. Diversification spreads risk and increases your chances of earning consistent returns.

Stay Consistent

Investing is a long-term game so avoid rushing into anything. Keep contributing regularly, regardless of market fluctuations. You can always make money investing no matter the state of the economy. 

Rebalance Your Portfolio

Over time, the value of your investments might change, causing your portfolio to become unbalanced and be at a loss. Regularly review and adjust your investments to maintain your desired investment allocation.

Be Patient

Investing takes time to yield significant results. Avoid making hasty decisions based on short-term market movements, and also avoid taking pushy advice from strangers to invest. Unless you are taking the advice of a legitimate broker, be patient and make educated financial decisions when investing.

Conclusion

Investing might seem intimidating, but it’s an essential step towards securing your financial future. By starting early and following some basic principles, you can make your money work for you. Remember, every investment comes with risks, so be sure to do your research and consult with professionals if needed. Stay patient, stay informed, and watch your investments grow over time

The best thing to do is start as early as possible. You can do all the reading in the world but nothing can prepare you for the stock market. It is a very volatile market at the moment due to the current economic crisis. Nevertheless, it is these early stages of investing that give you the life lessons you need to trade stocks. 

If you don’t want to run the risk of investing in the stock market with your money then don’t worry. Trading 212 allows you to have a practice account. They will give you £5000, which isn’t real money, and allow you to trade stocks. Your investment won’t affect the market either but this is a great way to get practice in and understand the stock market. It can be incredibly humping as well but try your best to treat the money like it is your own. If you lose some of it, be cautious of losing even more and be realistic with your investments.