WHY YOU’RE NEVER TOO YOUNG TO START INVESTING

Building an investment portfolio is traditionally something we don’t start to think about until we’re in the prime of life. However, everyone who has started investing seriously in their 30s and 40s wishes that they had started doing it earlier. All other factors being equal, the earlier in life you begin investing, the bigger your nest egg will be when you reach retirement age.

The reasons why people don’t start investing in their 20s or earlier are easily covered. One is that younger people tend to live in the present moment, and the future seems far away. Another, perhaps more sensible, objection is that the young haven’t yet reached the stage in their career where they can afford to regularly invest a part of their income.

While it’s true that some young people are existing on tight margins, it’s certainly not always the case. Many people in their 20s have a very respectable salary, and often fewer expenses and responsibilities, especially if they haven’t yet started a family. Also, you don’t need to put a large sum aside each month in order to start investing. What’s important is to get into the habit of investing, even with small amounts, and increasing your contribution along with your income.

One might also say that the young, by definition, lack experience and so aren’t best placed to make investment decisions. However, the counterargument is that they have more free time to learn and do their research, as well as more elastic brains and better memories to retain information. Information on subjects such as the pros and cons of gold investment is readily available for youthful minds to absorb.

As well as being open to education, the young are typically more tech-savvy than their elders, which gives them a distinct advantage when it comes to DIY investing or trading in stocks and shares. Online brokers and trading platforms offer a wide range of instruments and analytical tools, and there are educational resources to help you invest in stocks as a beginner. 

The main reason to start investing as young as possible is that the sooner you begin, the sooner you’ll reach your target. If your goal is to have enough money to retire comfortably by 65, then the amount you need to invest each month will be considerably less if you start at 20 than if you start at 35 or older.

Less obviously, if you invest $500 a month every month through your 20s and then stop, but don’t touch the money until you retire, you’ll end up with a larger lump sum than if you started investing $500 a month every month in your 30s and continued to do so through your 40s. This is because of compound interest.

Compounding, where your profits are continually reinvested over time, means that 10 years of saving early on trumps 20 years of saving in later life. This is the most compelling argument for starting your investment journey as soon as possible.

Legally, you can’t start investing until you are 18 years old, though even this isn’t an insurmountable barrier if your parent or guardian opens an investment account for you. Index funds are an ideal option as they’re low maintenance and follow the performance of major stock indices. Becoming a young investor can also instill the virtues of discipline, patience and planning for the future that will serve you well in other areas of life.

Another great advantage of starting to make investments at a young age is your increased risk tolerance. Most young people are in a better position to take risks when investing than their older counterparts. One reason is that they have less to lose, as they probably don’t have a family to support, and not as many debts and obligations. Another reason is that if things go wrong, they have more time to recover.

Risk is a necessary part of investing, and being able to take risks gives you more options and a better chance of impressive returns. If you’re young enough, it doesn’t matter so much if the stock you bought takes a downturn. You can afford to wait until it regains value. By playing the long game and having time on your side, you are more likely to make a profit eventually.

The best advice for future prosperity is to invest early and often. By developing good investment habits in your 20s, you give yourself the best chance of a happy and comfortable retirement.