Investment Tips For 20-Somethings
Let’s face it, there aren’t many 20-somethings opening investment accounts. You don’t see many millennials jumping up and down on the floor of the New York Stock Exchange. It’s a middle-aged man’s world, and it’s a particularly difficult one to break into. However, it’s time to break down those barriers, and start thinking about the future. Here at 20s Money, we’re all about achieving financial freedom early. And that means going one step further than saving. It’s all about making your money work harder, and that means investing. Let’s take a look at a few vital tips for young investors.
Invest in what you know
Investment is traditionally a middle-aged game, because it relies on experience. It requires an understanding of business, and the particulars of a company. As an investor, you need to know every tiny detail about a company. Let’s say you’re investing in Facebook. You need to know exactly what moves the fb stock price. Who’s on the board? What is Mark Zuckerberg planning next? What do their revenue reports look like? If you don’t understand a company, don’t invest in it. The same goes for the market as a whole. Learn about the market, and how it works before you dive in.
Only invest what you can afford to lose
As our tagline explains, we’re all about aggressive, yet responsible wealth building. Those are words to live by when it comes to investing. Now, investing is certainly an aggressive form of wealth-building, but it’s far from risk-free. There are lots of ways to mitigate risk, and ensure success. However, there are no guarantees. No-one knows what’s around the corner. So, only invest what you can afford to lose. Start small, and make sure your debts are paid off first. Build up an emergency pot of savings, and only invest the money left over.
Spread your investments
The biggest stock market mistake is putting all your eggs in one basket. Let’s say you love tech stocks. You’re obsessed with Apple, Google, Facebook etc. They’re all flying high right now, and their stocks are increasing year on year. So, you put all your money in tech stocks. What happens when the tech bubble bursts? What happens when they hit the market cap, and prices start to fall? All your investment money is coming down with it. But, if you had some investments in retail, banking, gold or even real estate, you’ll balance out the loss. The key to a diverse portfolio is eliminating risk. Don’t put all your money in one place.
The stock market has an exciting appeal. We hear of multi-millionaires making their fortunes overnight. The truth is not so exciting. It is possible to win big overnight. But, it’s also incredibly risky, and that day-trading attitude will lead to some big losses. Instead, focus on the future. In general, the stock market always goes up. Think long-term, and you’ll ride out the bumps.
Whether you’re looking to send the kids to college or just bump up your earnings, investing is a great idea. It’s never too early to start, but do your research. Start small, and don’t invest more than you can afford to lose.