Starting any skill, occupation or career at a young age is an added advantage, as it affords one the opportunity to make gains and even recoup returns as many times as possible for a long period before tiring out. The same applies to investing.
Experts say investors who start young generally have the flexibility and time frame to take risks and recover from their errors, but side stepping the following common mistakes can help improve the odds of success.
“Young investors have the best ability to seek a higher return and take on higher risk because they have a long-term time horizon, therefore have a high tolerance for risk”, Wayne Pinsent, financial blogger.
Most young people also tend to be less experienced handling physical cash. As a result, Pinsent advice young adults should invest there money where they can be assured of dividend and even long term goals such as retirement, rather than trying to manage such funds themselves.
Young investors have a greater ability to recover from losses (if any) through future income generation than an adult approaching retirement; it also offers an investor an array of options and opportunities, firms to invest in. Investors in their 20s will have least 40 years to accumulate retirement savings, experts say.
Experts advise that as a young person you should not look out for a quick swing in something as risky as the stock market. Instead allow the market to go through its mood swings and ride it out and you should profit nicely in the long haul.
While older adults might be easily tempted with hot stock tips designed to help them “make them rich” instantly younger investors should not be enticed with these approach rather they should buy stocks with the fundamentals to build long term investment opportunity.
Young investors have the luxury of time. Hence, they should not let current economic concerns affect their investing tolerance. Instead of seeing the glass as half empty, this is the perfect time for the younger generation to take an optimistic half full approach. Remember: when prices are down, investing returns increase decades down the line
Chris Seabury, financial expert say young investors can also take “calculated” risks, as they can afford enough time to recoup their investment should the market falter. He however cautioned young investors to employ the diversification tactics, which is a strategy that reduces overall risk by splitting investment through a number of sectors, as it reduces excess exposure to risks
According to him young investors should also have a realistic expectation of their investments, so they are not discouraged when the market struggles.