Think you’re too young to be an investor? Think again
IF YOU think investing is for only the wealthy, old or financially savvy, it’s time to think again. One of the biggest misconceptions among young people is that they need to wait until they have a lot of money or expertise before they can start investing. Nothing is further from the truth, and in reality the earlier you begin your investment journey, the more you stand to gain.
Despite being in the early stages of your career and earnings, you have a secret weapon when it comes to building wealth: time. By harnessing the power of compound growth and building good financial habits now, you can lay the foundations for a lifetime of financial freedom.
Here are five reasons why the best time to start your investment journey is when young:
You can start small. For example, if you sacrificed one take-out meal a month and instead invested R300 a month at a 7% annual return, after 10 years you’d have over R51 000. Keep that up for 40 years and your small monthly take-out sacrifice will have earned you R750 000. Best of all, R600 000 of that will be interest, which is your money working hard for you.
Investing is more accessible
than ever. Technology has made investing easy and affordable. There are digital platforms and products specifically designed for young investors that allow you to start building an investment portfolio with as little as R100. One example is the Nedbank Stockbroking for Young Investors product. If you are between the ages of 18 and 25, you can use our digital platform to invest in top JSE shares or diversified ETFs while paying reduced broker fees of just 0.25%.
You build a habit of financial
discipline. Starting this process of investing rather than spending at a young age will help you develop the discipline and financial skills to get ahead in life.
You can take more (calculated) risks. As a young investor, you have time to recover from a poor decision, market downturn or investment loss. When retirement is still decades away, you can afford to take on higher risk, higher-return investments.
You get to harness the full
power of compounding. When you invest money, and reinvest the growth, you get a return not only on your original investment but also on the money you reinvest. Think of it as earning growth on your growth. Best of all, every month the cycle repeats, creating a snowball effect where your money grows exponentially over time, so even small amounts invested consistently from an early age can grow into huge investment balances.