When you’re young, you likely get a lot of free advice. If it’s about investing, we’re here to cut through the noise and help you turn the info into wealth-building action. Use these tips to set yourself up for potential success:
1. Consider Starting Early
It may only take investing a small percentage of your salary each month in order to see the benefits of compound interest. If it fits within your budget and goals, starting early could be a way to dramatically increase your savings over time.
2. Set Investment Goals
Are you saving up to buy a house? Or putting money away for retirement? Investing with a reason will help you determine the right approach and keep you on track to pursue your financial goals.
3. Know Your Time Horizon
If you think you’ll need the money within the next five years, you might consider less volatile investments, like fixed income securities. Investing for the long-term (think: 15 or more years)? You might think about adopting a less conservative strategy.
4. Assess Your Risk Level
Knowing how much risk you’re willing to take on will help you narrow down your investment choices and keep you from letting your emotions guide your investing.
5. Analyze Your Budget
Make a list of your monthly expenses and create a budget (for instance, the popular 50/30/20 budget). By looking at your spending, you may discover extra money to invest each month.
6. Know Your Investment Choices
Familiarize yourself with different investment types to see what makes sense for you. Are you interested in international stocks and ETFs (exchange-traded funds)? Maybe bonds and mutual funds? If you’re more focused with sustainability, take a look at ESGs (environmental, social and corporate governance).
7. Go It Alone or Use a Robo Advisor
If you’re the independent type, you may be drawn to Self-Directed Trading. Or if you prefer to automate your investments, a Robo Portfolio can do the work for you.
8. Consider Avoiding Individual Securities at First
If you’re still learning the ropes, you might be more comfortable sticking to broader based investments like index funds and ETFs. These types of investments require less of your time and are less risky since they invest in numerous companies.
9. Diversify Your Portfolio
If all your investments are in one company’s stock, and they go out of business, you’ll wish you had a diversified portfolio. You may reduce your risk by holding a variety of securities that react differently to market changes.
10. Think Long-term
History shows whenever the market takes a dip, it eventually bounces back. Be patient: Give your money time, make consistent contributions and wait out inevitable market downturns.
11. Don’t Forget High Interest Debt
School loans or credit card debt can make allocating money to investments a tough choice. It’s possible to reduce your debt and invest, and we can help you accomplish both.
12. Get Your Match
Many employers offer a 401(k) match, which can be a great incentive to invest for retirement, helping you to potentially build savings even faster.
13. Open a Retirement Plan
When you’re 20 years old, retirement seems like eons away — but for many, now is the best time to start saving for the long haul. You may consider looking into Traditional and Roth IRAs to get started.
14. Automate Your Contributions
Set up recurring investments to take advantage of dollar cost averaging. With this strategy, instead of trying to time the market, you invest the same amount each month — sometimes you might buy high, but other times, you’ll purchase low.
15. Beware of Fads
Just because everyone is jumping on the latest meme stock or investing app doesn’t mean you should, too. Fad stocks are often unpredictable, so if this doesn’t align with your investment strategy, feel confident to sit them out.
16. Be Informed
A prospectus sheet details the performance of a company to help you understand its stock performance. And digital tools can help you track your investments, too.
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17. Don’t Neglect Your Emergency Fund
Investing helps build long-term financial security, but you need to be prepared for short-term, too. So when setting out on your own, don’t forget to start setting aside funds in an emergency fund. This money should be liquid (not invested in securities), so you can access it for medical emergencies or sudden home repairs.
18. Watch Out for Fees
Some brokers will charge a commission fee whenever you buy or sell stocks, which add up and make a dent in your overall returns. Trade U.S. stocks and ETFs commission-free with our Self-Directed Trading.
19. Ask for Help
Investing can get complicated. Don’t be afraid to reach out to a financial advisor, older family member or trusted friend for guidance. A look through our investing guide e-book or a quick Google search might even be enough to answer your more basic questions.
20. Adjust as You Go
As life circumstances change, it might make sense to move your money into different types of investment accounts or change up how much you contribute. Any time you move up a pay grade, take out a loan or are nearing retirement, remember to reassess your investments.
Time is on your side.
Getting started is sometimes the hardest step, but starting to invest in your youth is advice worth considering!
Discover the benefits of building wealth in your youth.
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