Business

Five reasons to start investing at an early age

SSL in the Money

with ViERNESS KASSIE

Wednesday, May 17, 2017

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There are several reasons why most young people are reluctant to invest. Some hesitate because they think they are too young, while others might not understand the benefits of investing. But any individual can invest, and the earlier the better.Investing is a way to save money towards a financial goal. There are many types of investment instruments, the most common type being stocks and bonds. If you are a first-time investor, these would be best for you.

A stock is a type of security that gives you part ownership in a company and gives you a claim on the company's assets and earnings. Bonds are issued by companies to raise money from investors. The funds they receive from investors are loans which are repaid over time.

Of course, young people would find it hard to put their small savings into investments, but with investments come future financial opportunities.

Research can widen your knowledge on investing. This can make you a successful young investor. Young investors can concentrate on smaller fixed investments. They can start with a small amount of money which reduces risk. It's also best to have a diversified portfolio: this means that your portfolio is invested in different assets, rather than investing your money in just one stock.

Before starting a listing, ensure you mention what the listing is for.

1. Reaching your educational goals

While money may be tight, going to college or university is usually the main focus of parents for their children. In most homes, families are often struggling with difficult financial circumstances. This can prevent children from getting a tertiary education. With good returns on your investment portfolio, over time you will be able to finance your own tertiary education.

2. Financial independence

As a young person, it is crucial to save money on a regular basis. Get into the habit of putting aside part of your monthly income or weekly allowance into the purchasing of stocks in an investment account. Having savings that you can depend on will assist your wealth-building programme. This means that in the future, you might be able to open your own business, buy a car or a house, and even take a “dream” vacation with your family.

3. Debt - loans

How often do people complain about paying back loans? Student loans and credit cards are the main debts young people have - it will sometimes take forever to pay back. However, if you want to come out of debt, having an investment account would allow you to pay off these loans.

4. Unexpected future emergencies

An emergency can come up at any time. What would you do if you had a health crisis or if you lost your job? Do you have a backup plan — a source of funds to help you through these difficult times? Many of these emergencies can be very expensive. You may not have another source of funds to pull from. With an investment account, it's okay if you need it for an emergency; we all go through these times of special and urgent financial needs - but remember to always build it back up.

5. Retirement

You might think you are too young to start your retirement savings, but in fact you are never too young to start. Your main investment target for your long-term savings is potential growth. Investing at a young age, perhaps at the age of 18, you would have a time advantage to grow your investments by the time you reach your 60s. You need to keep your assets, whether equities or mutual funds, in holdings until retirement.

Investment objectives such as time horizon, personal objective and your risk tolerance can determine what you should invest in. This ensures that your investment portfolio meets your financial objectives. Keep in mind that the market is sometimes risky, so do your research and speak with a broker. You are never too young to invest; as you prepare yourself for the future.

Be on top of your financial game, be independent, and make your money work for you through investments.

Vierness Kassie is the Call Centre Team Leader for Stocks and Securities Ltd.

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