Tips and tricks for young investors

Tips and tricks for young investors

When you are young and energetic, it is the best time for you to start investing. Because not only will it open an arena of learning for you, it will also place you at a financial advantage in comparison to your peers. Investing in small businesses will further introduce you to the rules and techniques of investment early on in life.

However, if you are young you would be on the brink of starting your career or trying to learn new skills. This will make it near impossible for you to think about taking an extra sum of money and investing it into a business plan. We have taken your situation into consideration, therefore this guide is specifically devised for ambitious youngsters like you.

Before you start hastily investing in random businesses. You should first make yourself familiar with the principles and disciplines of investment processes. Don’t think that you do not have to be cautious because the investment is small, as small investments have a lot of potentials to grow bigger.

With that being said, at first, you need to make sure you have a constant flow of weekly or monthly income. This is will make sure you will find it easier to commit to investment projects. Also, since you never know what the future might hold, a steady flow of income will keep you from being penniless, if things turn bad.

There is a set of questions that you need to ask yourself before deciding to invest your money in a project.  

●       Is my income steady?

●        Do I have enough to cover myself in case of an unforeseen emergency?

●       And Can I afford to spend a good chunk of my salary on investment?

Small investment just like any investment requires your undivided attention. In short, before deciding to become a young investor, you need to first really make sure that you are wholly dedicated to investing not just your money, but your time and energy as well.

When to start investing?

If you are serious about making an investment, then you do not have to be worried about your age. Because age is just a number to be an investor. However, there are two things that need to be kept in mind before making a final decision.

First, make sure that the debt of your high-interest rate has been paid off. Now you might ask what high-interest debt is. So basically, high-interest is any debt that surpasses 3 % of the interest rate. This may include your credit card debt, student loan, or any personal loan you had asked for. If you have made sure that you are completely loan and high-interest debt-free, it is time now save for your emergency fund.

An emergency fund is another name for a backup fund, that secures you financially in case of unfortunate events. This fund equates to the amount of money you earn in at least 3 months. . Keeping an emergency fund is crucial as it provides monetary security for you during unanticipated occasions.

For instance,  before covid-19 hit the world, nobody could have anticipated the adversity a meer flu-virus could bring. During this period, everyone needed to spend extra money to either protect themselves or treat themselves. Furthermore, due to Covid 19  economies of many countries were greatly affected. Therefore for situations similar to these, one needs a blanket of financial security to avoid getting caught in a tornado financial crisis.

Once you have made sure that you have an ample amount of emergency fund, now is the time to think about making an investment.

No matter how covered you think you are, one can hardly ever be prepared enough for the investment processes. Because after all a chunk from your hard-earned money is being put at stake. Furthermore, you cannot see what happens to the money you have invested. Therefore, you need to have blind trust in the process in addition to having an enormous amount of patience and commitment. Also, you should make yourself prepare to wait for a long period, as it takes months if not years for the investment to start giving you a profit.

Make yourself believe that this process is no different than attending university. As in university, you are required to put, money, effort and time into a degree that will not benefit you until you graduate and find a decent job. Same as that, your time to time investments will not benefit you until the desired results have achieved.

Why should become a young investor?

As mentioned earlier, there is no age specified for being an investor and the earlier you start the better it would be. That is because if you invest earlier, you will get the profit earlier. To further make you understand why it is beneficial to start investing earlier in life, take a look at the benefits we have jotted down below.

Gains out of compound interest

The kind of interest that you earn on capital is known as compound interest.  It is basically the reward that you get for reinvesting the investment instead of choosing to pay the interest out. Doing this will help you accumulate the interest, making the amount larger and larger for you. This is especially essential if you have started fresh you, as it will enable you to earn a large sum in a very short period of time.

Introduces you to rules of spending

Being an investor at a young age has additional psychological benefits. Because when you take a specific amount from your salary, a positive routine is attained, which forces you to look for more and more budget-friendly ways to make the ends meet.  On the other hand, if you are young with no aspiration of investment, your already responsibility-free lifestyle can make you develop habits of over-spending.

Helps you to secure your future

Investing early on means saving up for later on. So, the early investment can make you mentally and monetarily ready to face hardships of adult life. However, struggling from now on, would not be a piece of cake, but it will certainly help you later in life.  Furthermore, it acclimatizes you with the process of saving and spending wisely. Therefore if you are hit by financial adversity, you will have the wisdom and experience to navigate through it.

Gets you early retirement

Investing early in life can lead you to get retired earlier in the profession.

According to research, the probability of retiring early requires around 25 to 30 times of the assumed annual expenses either saved or invested.  In addition to this, the percentage of the amount can increase on the basis of luxury that you are currently enjoying or wishing to have. All of this isn’t possible unless you have started saving up from now.

Account Savings

For every youngster, having a saving account is the perfect option of investment. Because saving accounts are nearly risk-free and they also do not require your attention all the time.

Saving Accounts require you to just keep paying a specific amount of money for a specific period of time, after which you will get the advantage of fixed-rate interest.

You can either opt for a high-yield savings account or just have a traditional savings account. It just depends on your income and the amount of money you decide to invest.

However, as the name suggests, a high-yield savings account can give you a higher amount of interest, making your money increase at a very rapid rate. There is a tiny problem though, high-yield accounts have some restrictions and regulations, making it more difficult for you to access.

Try Crowdfunding

Crowdfunding is a way of making small investments to acquire large sums from people. This is the most innovative way of earning. The opportunity of crowdfunding is usually for the new businesses which show great potential for success. Especially, crowdfunding in the UK is available for young individuals to invest in their small business ventures. But crowdfunding can be relatively riskier. If you hastily invest your money, there is a chance of you being conned.

However, there exist some types of crowdfunding that can be beneficial for you. The type of crowdfunding investment that you choose is basically dependent on your preference.  So whether you choose to make bucks through dividends,  property, or share price rise, it will all be dependent on the type of crowdfunding appropriate for you.

Crowdfunding Equity

When people ask investors to put their money for their business ventures, it is known as Equity Crowdfunding.

These platforms allow you to inspect people’s businesses and analyse their portfolios before deciding to invest in their start-ups. Therefore, do thorough research, check the terms and conditions and select a company that looks the most authentic and offers the highest exchange returns. For equity funding, the investor is offered an opportunity to spend as little as ten pounds. After the start-up takes off, you will get the money almost twice the amount you had spent. That is why it is vital for you to do deep research before deciding to invest in one company.

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