If you are starting to make an income, no matter how young you are, it is never too early to get started with investing. In fact, it is a good idea for parents to start kids off investing so that they have the concepts down well before they even get into the workforce. But, if your parents were not that forward thinking, here are four tricks that will help you get your investment portfolio under way.
Start Early
They say youth is wasted on the young. This is almost always true when it comes to investing. Starting Early with investing is the best way to ensure that you will have investments that have matured by the time you are ready to retire. Most investments take a long time to get to a profitable point, so the earlier you start, the better your chances of actually making decent increases on your investments. One great place to start is with either a “Traditional” or “Roth” IRAs. It is an investment vehicle that can be a great long term strategy for building future wealth due to their tax advantaged status. The major difference between a “Traditional” and a”Roth” IRA is when you pay the taxes. In a “Traditional” IRA you get to take the income “before” taxes, which means you get more to invest. In a “Roth” IRA you pay taxes first but you get to take all the money out (i.e. the all the gains) tax free. So if it is going to have a long time to grow you would probably be better off putting it into a ROTH. However, if you need the deductions now, you will probably be tempted to go for the traditional IRA even if you might be better off with the Roth in the long run.
Another difference that you need to be aware of is between a 401K and an IRA. Basically a 401k is offered by employers and an IRA private (i.e. you have to set it up yourself with an investment company or bank).Â
Work with a Financial Advisor
If you are new to investing, then a financial advisor is going to be an important asset to your investing success. Financial advisor RMR Wealth Builders says, “In providing financial planning services to clients, the most important aspect of the plan is to prioritize the client’s goals and objectives based on what is most important to their financial situation. Realizing that a client’s funds are limited and that the most important goals need to accomplished first is critical to ensure success of the entire plan.”
Professional advisors will be trained in investment and savings strategies you have likely never heard of before. They will also help you take your money far more seriously than you presently do. All these points are essential for developing good investing habits. All successful rich people have financial advisors that they have consulted and learned things from, so why would you not do the same?
Read and Learn
There are virtually thousands of books written on investment strategies and building wealth. It is almost criminal that young people are not required to read such materials in school. If you fear it is too costly to buy a library full of investment books, then you can join countless investment newsletters online for absolutely free.
Even paid services allow people to join their lists for free and obtain some rudimentary insights into how investing works and some strategies they may have never heard of before. Of course, check Amazon and Ebay for used books, because people sell investment books off for pennies on the dollar. There really is no excuse to not have access to this kind of life-altering education.
Diversify
You have probably heard that you should not put all your eggs in one basket. This is even more true when it comes to investing money. If you put all your capital into a single investment and that investment flops, you just lost everything. By diversifying your investment portfolio into different areas, you are giving yourself many potentially different streams of income. If one or two fails, you can recover easier because of diversification being a smart way to mitigate investment losses.
Conclusion
Investing is something everyone should think about doing to help secure their own financial future. There are many ways to invest and come out ahead. Some investments may not seem like investing, but they still return a high rate of return. The idea is to build your investment portfolio by learning how to best make your money work for you over an array of different investment opportunities.
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