For most young adults, investing early is not something they think about until their financial situation becomes more stable but what they don’t know is that investing early is actually the best decisions anyone can make.
Young age is the perfect place and position for anyone to enter the investing world even if you have debts hanging on your financial future from college.
Here are some pros and cons of investing at a young age
Pros of Investing at a Young Age
One of the perks of being a young adult is that you have the time advantage. You might not have someone who would loan you money even with a guarantor or be able to afford to live in the nicest neighborhood in the city but you have the ability to compound your investment by reinvesting the earnings.
Since young adults have the time advantage, it means they can generate wealth over time. The longer money is put to work, the more wealth it can generate as the investor ages.
As an investor ages, the amount of risk he or she can withstand will begin to reduce. Young people have the ability to take on more risks than people who are older than them.
Individuals who are about to retire might prefer to invest in portfolios with low risk or risk-free investments such as bonds. Young adults can decide to take the initiative to build an aggressive portfolio that might be subject to more volatility with the promise of greater gain.
Learning Curve and Technology
Investing at a young age means you will have time to study and learn from your successes and failures – not someone else’s. Since investment has a long learning curve, young adults are at an advantage as they have time to study the market and refine their investments strategies.
Young investors are also tech-savvy. They have the opportunity to study and research on the internet. Along with the combination of fundamental and technical analysis provided by online platforms, there is so much the young investor can do with the amount of access he or she has to know.
Now that we know the Pros of investing at a young age, let’s look at the cons.
Cons of Investing at a Young Age
If you decide to invest based on the wrong information without taking time to learn about the stocks or the company you’re investing into, you could end up losing your entire investment.
A safer form of investment is bonds and treasury bills which are not as exciting as other forms of investment like stocks or digital currencies.
Millennial are used to getting what they want when they want. When they order a flare dress on the internet, they expect to get it in the mail the next day. When they order for pizza, it has to be delivered in 20 minutes. unfortunately, investing requires you to spend time researching and learning about the products or services that the company offers before you put your money into it.
You have to learn how the business model works and follow its development and sometimes, in the case of digital currencies, study the trends to know when to invest and how to take advantage in order to maximize your returns. These are reasons why investing might be difficult at a young age.
Investment is always a good thing irrespective of the negative sides. The goal is to have a diversified portfolio so you can benefit more with little exposure to risks.
There should be a mixture of bonds, stocks, digital currencies and even commodities in your portfolio. This is one of the best ways of ensuring you gain the highest returns over time.