How to Start Investing as a Young Adult

You’ve made the decision to start investing. This is a choice some adults make when they’re twice your age. Yet whether you just graduated from high school, or you’re several years into college, you might think your youth is a drawback. It can actually be quite the opposite. If you invest now in your early 20s compared to your mid-30s or early 40s, your money has longer to become valuable.

Of course, investments and stocks are complicated dealings. Here’s what you should know before diving in head first.

Have an Understanding of How Investing Works

The world of investments may be complicated.  The greatest principal to learn early is the value of compound interest. Compound interest is the interest you earn on your interest.  You are earning interest on both your principal and the interest you earned in the past.  The alternative is simple interest in which you only earn interest on your principal.   One crucial component of compound interest is that the more time your investments have, the greater the compound interest effect can be. 

So, the younger you are when you start investing, the better your chances that your investments will accrue a greater return. 

Have Money

This comes as no surprise, but you need to have the cash handy to spring towards the investment. It doesn’t always have to be a huge sum, but still, it shouldn’t set you back financially to invest. You should still be able to pay for your expenses, like rent, food, school supplies, student loans, and the like.

If you can’t, it’s better to wait to invest until you’re more financially comfortable.

Don’t Expect Results Overnight

If you’re investing because you think it’s some sort of way to make millions overnight, you’re going to be sorely disappointed. Yes, some people do invest in a new company and eventually make a lot because that company takes off. That said, this is not an overnight process. It can sometimes take a decade or longer before you see a real payoff on your investment. You’re going to have to be patient.  

Be Ready for Ups and Downs

Sometimes you think a stock is going to perform really well, so you invest in it accordingly. Then the company tanks or has a major PR faux pas, and your investment was all for naught.

It happens to even the savviest financial experts on Wall Street, so of course it can happen to you, too. Instead of being deterred from investing again, chalk it up to a learning experience and try to avoid the same mistakes next time.

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.