Top Financial Tips Young Investors Must Remember
Did you know that the Social Security Retirement age keeps increasing and will rise to age 67 for those born 1960 or later? It’s important to invest young so you can retire when you want no matter the age! Young investors have certain tips and tricks they abide by which will lead to higher returns.
You can be a young investor, and have all of your dreams and goals come true for your savings. In this article, you’ll learn all about investing the right way and tips for investing young. Read on to discover these tips and be sure to implement them!
1. Young Investors
Dreaming of investing and building your savings? The first and most important thing to do is to start! If you’re feeling overwhelmed, just know that you can learn by doing. When you’re a young investor you have time on your side, you’re young so have plenty of time to study the market and strengthen your strategies.
Investing young you can take advantage of what’s called compounding. Compounding is a return earned on your principal and past returns. If you have your money in an investment account, it’s the percentage you earn on top of the original investment and previous earnings.
If it’s a traditional bank account it’s the interest on that amount plus past interest earned over time. As you see here, the sooner you begin investing the more compounding can happen!
3. Hold a Diversified Portfolio and Risk Take
Investing is also about taking risks to build. One of the best ways to invest money in your 20’s is to build a diversified portfolio. It’s great to have your savings, but you’ll want to invest as well to build up your savings and never to put your eggs in one basket.
It’s important to use stocks, bonds, and assets because the more places you have your money, the lower the chances of losing a lot of money.
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4. Make Regular Contributions
When you’re investing young, you’ll want to make regular contributions in your investment accounts. You’ll want to come up with a certain % that comes out of your paychecks and into your investment accounts.
When done well this not only will set you up for the future but will make sure it’s a steady amount that won’t hurt the bank.
5. Save More as You Age
When you’re in your 20’s you might have more goals such as buying a home, paying off student loans, or purchasing a car. It’s great to have those goals, but also make sure you’re saving and investing.
As you age, you’ll want to invest more. When you’re young, you can invest and still go after your goals, once you reach those goals, you can increase your investing percentage. Along with raises, you might not even notice the increase!
6. Avoid the Seven Layer Dip of Fees
When investing, the choices can be overwhelming and confusing about what’s considered smart investments young adults. You’ll want to seek guidance from a financial advisor or broker to avoid large fees and losses.
Watch out for these fees:
- Mutual Fund Surrender Penalties
- Mutual Fund Fees
- Brokerage Trading Commissions
- Wrap Management Fees
- Internal Mutual Fund Operating Costs
- Markups on New Issue Securities and Bonds
- 12b-1 Fees
Always speak with your advisor about these fees and avoiding them!
7. Never Withdraw Early from Your 401-K
Your 401(K) is used for retirement and if you take money out too soon you can receive hefty fees. There’s a 10% tax penalty for withdrawing early from the IRS.
It’s a good idea to have an emergency fund in case of a job loss, unexpected expenses such as work needed for your home, etc. This emergency fund is important so you won’t have to withdraw from your 401(K) and suffer from taxes!
8. Ignore Competition
Healthy competition is fine, but if you’re seeing celebrities on tv or people you know who are wealthy, avoid trying to keep up with them. If you’re not at that point yet financially, it’s best not to rush it, and better to keep your goals in mind.
Remember, you want to be young investing, but also smart about it so you don’t wind up bankrupt! Don’t go investing with money you don’t have and wrack up the bills because you can’t pay off your student loans.
If you’re looking at your friends traveling and their lush lives, keep in mind they might have just put that on a credit card, and might not be saving for the future. Focus on yourself and your life. Educate yourself on investing and bettering yourself with reading as many books and researching as much as possible!
9. Automate Investments
One of the best things you can do for your investments and saving time is automating your investments as much as possible. This will teach you to save over time and remember that you’ll have money for yourself plus for investing. A 401(K) is one way to do just that!
From your job sign up for your 401(K) and have them take your pay automatically out of your check. You can also automate your high-yield savings account and a brokerage account.
In this article, you learned all about young investors, and the tips they use for the biggest profits. Remember to come up with a goal and plan, and then make it happen.
You can invest as you learn, don’t worry about learning as much as possible at first. As you learn while investing, you’ll be able to see what works and what doesn’t. Before you know it you’ll be compounding and so glad you invested young!
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