With the increasing reach and volume of information readily available online, it isn’t very hard for youngsters to keep pace with the various investment opportunities available in the market. And even with the uninitiated, a general awareness of the benefits of investing or keeping a part of income aside is likely to be found.
Investment Guide For Young People
Contrary to popular belief, investing isn’t just about how many times you multiply your wealth or the colossal returns you are able to generate. Those are important considerations for any investor, but your investing experience is most likely to improve if you invest in yourself, understand debt better, and decode your investment objectives.
Self-investment
“An investment in knowledge pays the best interest” – Benjamin Franklin.
Most investors consider the money they earn now and their current wealth when investing. The focus is mostly on financial capital. This can actually be short-sighted because the biggest asset that you have is yourself. Your skills and experience are the best assets you have and the most critical assets to hone continuously. Improvement in human capital is directly proportional to improvement in individual wealth.
Hence, never stop learning. Read those dusted books, develop a new skill, pursue that certification, and attend that workshop or seminar. You would be doing yourself a favor. Invest in yourself to develop the skills or talents that will help you reap positive returns over your lifetime and increase your earning power.
Let’s talk about debt
It is said that debt can make good outcomes great and worse outcomes disastrous. A person in debt, especially one with a high-interest cost, should continuously work towards paying it off. Any prepayment you make saves you money in terms of interest. The higher the tenure, the more savings for you.
It may seem blissful to be living off debt. More of your wants are met, and your lifestyle improves. But there is a cost attached. Credit cards or personal loans aren’t the issues; it is when you go overboard and live above your means. And that is very easy with large credit limits.
The best way to keep from taking too much debt is to understand the implications and costs behind debt. Since debt forms a fixed cost in your budget, imagine the consequences of a job loss, a salary, or a stoppage of income being used to service debt. Instead of making ends meet in those stressful times, you would be servicing the loans and adding more stress to your life. Debt also leads to more savings lag. As you keep paying a good portion of your money towards interest, you merely save enough or don’t save unless the debt is over. Missing out on just a few years of savings leads to huge opportunity costs.
Hence take a minimum amount of debt and for expenditures that classify as necessities. Use it judiciously.
The why of it
Why do you do what you do? It may not be a simple question to answer– but in investing– one of the important ones to ask yourself. Investing should have a purpose or a stated objective. In fact, the objective is likely to push you towards the goals and be a prime motivator in helping you stay invested or invest consistently.
Most people defer investing or savings as it is a disciplined and slow process that does not have immediate results and is the sacrifice of current expenditure. Hence understanding the why is about finding that driver in order to work more effectively towards your goals.
“People with goals succeed because they know where they’re going.” — Earl Nightingale.
Your goals can be anything. Priority-wise, an emergency fund and retirement plan should be planned ahead before moving on to others. Your goals are about you and what you want with your money. It could be that long overdue trip to the Himalayas or a ticket to watch the FIFA world cup. Remember to be honest when it comes to goal setting. Goals should be specific, time-bound, and realistic.
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– Nischay Avichal
