It’s pretty smart to start investing when you’re young because the sooner you get started, the more gains you will make and the quicker you can achieve financial stability. However, it matters just as much how your money is invested as it does the fact that you’re actually doing it, and this is where many young people – the ones who even bother thinking about investments at all – go wrong.
If you’re young, do yourself a favour, and despite the tough economic times many of you are experiencing, make an effort to save and invest now – it will see you well in the future. Also, take a look at these common investment mistakes made by young people and do your best to avoid them:
Investment Mistakes: Don’t Wait Too Long
If you’re thinking that you’re still very young and you can afford to wait a few years, rethink your strategy. Like I said above, the sooner you start saving, the sooner you will benefit from those sweet compound gains and build a better financial future for yourself. I know paying for rent while saving for a house and managing your bills can be tough enough without throwing investments into the mix, but they are so important.
Investment Mistakes: Being Too Scared to Act
A lot of young people tend to avoid investing or only invest very modest sums because they are scared of the risks that come with investments. True, all investments come with risks, but if you take the time to learn the basics of investing and you consider the potential risks against the potential returns, it is possible to do well in the long-term. That means no cutting your losses and cashing out when you do suffer a minor setback!
If you want to play it safe, go for a portfolio that offers around 80 percent bonds to 20 percent shares, and you should be pretty safe.
Investment Mistakes:Speculating Instead of Investing
On the other side of the coin, many young people decide to gamble their money by speculating. They spend money on something that they hope and think has a good chance of increasing in value in the long, or even worse short-term, without diversifying their portfolios and they end up regretting it dearly when they lose everything.
Investment Mistakes: Not Comparing Brokers
When you’re investing, initially at least, it can be useful to have the help of a stockbroker who is more experienced in the investment world that you are. You can learn a lot from them and make decent gains if you do so, but only if you choose wisely. It’s so important that you compare online brokers. Not only so that you can get the best deals on fees, but also so you can find a broker who has a good reputation – there are a lot of rogues out there. Fail to do your due diligence, and you could very easily be taken for a ride.
Investment Mistakes: Going After ‘Hot Stocks’
Hot stocks are stock that are having their moment; stocks that are trending and which everyone is talking about – think of the recent rush to invest in Bitcoin as prices soared and you’ll get the picture. These stocks tend to be very popular with young people who don’t really know what they’re doing because there is a real buzz about them and people are making money now, The thing is, these stocks are often nothing more than a flash in the pan, and they could plummet as quickly as they rose. Of course, if you want to invest in them, they can make up a small part of your portfolio, but you should be investing the bulk of your cash more wisely in index funds and the like, so that even if those ‘hot’ stocks fail, you will still have a decent portfolio to fall back on.
Saving Cash Instead of Investing
Although it’s wise to have some money saved up for emergencies and so that you are solvent, if you believe that saving money is better than investing it, you are under a misapprehension. As long as you do it right, take advice and weigh up all of your investments beforehand, you are likely to make fair better gains with money that is invested than you are with money in the bank earning you a miserly amount of interest each month.
If you can avoid these fairly common mistakes that young people, in particular, but also older people who’ve never invested before often make, there is a very good chance that you will have a bright financial future – it just takes that first step to make things happen.