Are you missing out on financial growth?
Oh The Places You’ll Go: 5 Reasons To Start Investing When You’re Young and Broke
According to a recent Facebook study, most people under 30 don’t think they have enough money to start investing. There was a time when you needed big bucks to become an investor, thanks to minimums from financial advisors and even online brokerages. But a new breed of digital investment services are making minimums a thing of the past. That’s paving the way for a younger generation of investors. And it turns out, starting to invest when you don’t have much experience or even much money can actually be an advantage:
1. You’re a blank slate. You don’t have bad habits to unlearn, like trying to beat the market by trading in and out of individual stocks frequently. Turns out that rarely works, and it’s not really the point of investing. On the other hand, you’re open to learning about the benefits of investing a little bit on a regular basis, making investments you want to hold for the long term, and spreading your money around to diversify your holdings.
2. You have to start small. If you had $50,000 to invest, you might be tempted to plunk it in the market around the same time. But who knows – you could be investing everything you’ve got right before the market drops off a cliff. And with so much at stake, you’d probably be pretty worried about making the wrong investment decisions. If you’re just a few steps above dead broke, on the other hand, you have no choice but to start investing with just a few bucks, and to add more every week or two when you can scrape it together. That’s actually a much better approach. It’s not as scary, since you don’t have much to lose at first. It gives you time to learn as you go. And by investing a little at a time, you reduce the risk and the stress of timing the market.
3. Time is on your side. Let’s say the market grows 10% on average over the next few years. Not every year, just on average, around the same as it did from 1900 to 2000. And let’s say you invest $100 every year. After 20 years, you would invest $100 x 20, or $2,000. But thanks to compounding, your investment would be worth nearly $7,000. Some people believe Einstein said compounding is the “most powerful force in the universe”. Whether or not that’s true, compounding can do amazing things for your investments. Time is the key, and the younger you are when you start, the better.
4. You’re in this together. It’s awkward to talk about money when some people have a lot, and others don’t. But when you’re starting out, you’re all in the same boat. That means you can open up, share ideas, and talk each other off the ledge if someone is tempted to do something silly, like sell in a panic when prices drop. So get started with a few friends when you’re young, and someday you may just look back and laugh about how little you started with.
5. You believe in the future. Investing is all about believing in the future. And nobody has more optimism and freedom to explore the future like someone in their 20’s. Pick up a copy of “Oh, The Places You’ll Go” by Dr. Seuss, and take it to heart. It may be the most powerful investing inspiration around, and even a five year old can grasp the concepts.