Investing for Beginners: How To Invest When You're Young
Throughout high school, we are taught so much that we never end up using it.
Sadly, we often don’t learn some life skills that would be helpful around financial literacy, such as budgeting tips, planning finances and learning how to invest when we’re young.
Investing can seem daunting at any age, but more so when you’re younger when you may not have the experience or as much disposable cash.
There are many benefits to investing, which you can learn by educating yourself or your kids.
Here is everything you need to know about investing when you’re young.
How To Invest When You're Young: Where do I start?
Research is your best friend when it comes to investing. Getting as much information as possible to build up your knowledge bank will equip you with the tools you need to start.
Inovayt Financial Advisor Melbourne, Luke Mase, says, “Education is important – the younger you can learn about this sort of thing, regardless of whether you’re investing or not, the better.”
As there are so many online sources, it’s important to reach out and discuss your situation and objectives with a financial advisor to make sure what you’re reading is correct.
Speaking to a professional about investment advice will arm you with knowledge and answer any questions.
If you have children who you would like to start investing, you’ll also be able to get some advice on how to best broach the topic with your kids in a way that’s easy to understand.
The Australian Stock Exchange (ASX) is a trustworthy site and also has a resource called The Sharemarket Game, which teaches new investors about how the share market works and how you can invest.
Should I use apps, cryptocurrency or go straight to the share market?
When it comes to choosing where and how you should invest your money, there’s no correct answer.
Where you choose to invest should be based on what your financial goals are – all of which a financial planner can assist you with.
Depending on which avenue you plan to go down, there are some things you need to consider.
Exchange Traded Fund (ETFs): “An ETF functions like a managed fund. You put your money into an ETF and there’s a manager in the background who runs that ETF and spreads your money around for you,” Luke says.
“ETFs are the best way to start, as they give you broad exposure and diversification to the whole market right from the start.”
As you begin to learn more, you can talk to your fund manager about any specific sectors or markets you would like your money to be invested in.
Apps: There are countless investing apps available to download and use right from the comfort of your couch. These apps such as Raiz, Etoro and Spaceship help invest your money in a low-stress, set-and-forget way. “With apps like Raiz, your money is put into a managed fund type of set-up,” Luke says.
“You’re putting your funds into the hands of someone whose sole job is to manage your money.”
These apps often also let you invest small amounts of money rather than needing a larger minimum deposit. Unfortunately, these apps won’t make you rich as they are micro-investing programs designed to be a starting point for investing.
To learn more about micro-investing apps, head to our blog.
Share market: Investing straight into the share market gives you the freedom to choose which companies and sectors you’d like to invest in. If you choose to go down this path, you must have a good understanding of how the share market works and the risks involved depending on where you’re choosing for your money to go.
Cryptocurrency: Although there are success stories of people making money from cryptocurrency, there is an element of risk involved. Luke says, “If you’re going to go into crypto, treat it like a gamble and be prepared to lose what you’re putting in and make sure it doesn’t jeopardise what you’re trying to achieve financially.”
To learn more about cryptocurrency, read our blog.
Do I enter the share market as soon as possible or save to enter the property market as an investment?
Although this is another commonly asked question, unfortunately, there’s no right or wrong answer.
It all comes down to your goals and what you’d like to achieve financially.
If your goal is to own your share of investment properties or to try and buy a home to live in, you may prefer to save and investigate entering the property market rather than investing large amounts of money in the share market.
“It all depends on what your objective is,” says Luke.
“Plenty of young people nowadays are opting to invest in the share market and rent a home somewhere as they see this as a better investment, but it comes down to what you want.”
What to be wary of:
With so much information available online, young people and their parents must be equipped with reliable information so they can make the best possible decision.
Luke cautions, “If it sounds too good to be true, it probably is.”
With the amount of misinformation and scammers, it can be easy to be sucked in.
Making sure you’ve done your research and spoken to a professional will help ensure you’re avoiding these traps.
“Before you invest, work out why you’re investing and what you’re trying to achieve,” says Luke.
“Your timeframe is key. You need to understand what you’re trying to do before you put your money into something, then once you know your objective, you can start researching your specific area.”
Be sure to look at how your money can influence your other finances, though.
If you’re investing money in the share market from a young age in the hope it’ll compound enough for you to use as a house deposit, be very wary of what would happen if the stock market were to crash, and you were to lose your money to achieve this goal.
Starting your investment journey from a young age and sharing this with your children can help create strong financial knowledge and a good set-up for a positive financial future.
Whether it’s through the share market or property, there are many options out there. Chat with one of our financial advisor team members to help you set up your financial goals.
