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Never too young: Here’s how investing can change your life, but only if you start early on

Published Dec 15, 2022 3:00 pm

Can you be too young to invest? Yes. Can you be too young to learn to invest? Never. Check out how you can create and grow your investments at an early age—and what to invest in today.

In the Philippines, the legal retirement age is 65 years, while life expectancy is around 71 years. These numbers show that an individual has about six more years to live after retirement. Older age is generally associated with health problems and a lack of stable and sufficient income. How can you prepare for retirement and even retire early? There’s an answer: start investing early on.

Why is it important to start investing early?

Putting money in motion from an early age is one of the best ways to ensure a better quality of life in the future. Contrary to popular belief, you can start this path as a teenager—although at this stage, most people still do not have a fixed income, and even their professional future may be uncertain.

In adolescence, the best thing you can do is to invest in a good education. This can increase the possibility of getting a job, enhancing your earning prospects. Although it is impossible to see what the future holds and decide which path to follow at this age, investing in yourself is always a good idea.

On the other hand, the teenage years can be the ideal time to learn about the operation of financial markets, such as the foreign exchange market, or Forex. You can start learning about these markets and begin setting financial goals at an early age. Some of the most successful investors and traders did just that. For example, Warren Buffett bought his first stock at age 11, while Ken Griffin—who now has a fortune of more than $20 billion—started his company Citadel Investments at age 18. The same is true of other successful investors, such as David Einhorn, Ken Fisher, and Bill Gross.

A good way of getting started is to spend time reading books, using free educational resources, watching films about financial markets, or practicing on demo accounts of various Forex brokers.

The value of putting these tips into practice at an early age is that some mistakes are made, and there is still plenty of time to recover and learn from them.

Around the age of 21, people usually complete their higher education and have some idea of what they want to do with their lives. They commonly enter the job market and look for their first professional job.

This can be one of the most important stages in life since the decisions a person makes at that time will impact their future. For example, if you decide to start a business instead of being a team member, this will probably define the course of your life.

Investment options for young investors

At this age, engaging in two types of investments is important. First, you should start saving for retirement by setting aside a fixed percentage of your monthly income. For example, for a salary of P25,000 per month, you could decide to save 10% for retirement. If you start at age 25, you will have more than P1.2 million saved for retirement at age 65. However, if you invest this money and earn a modest 3% annual interest, then this amount would exceed P4.6 million.

The sooner you start saving and investing, the better. Considering a similar scenario, if someone with a monthly income of P25,000 starts saving for retirement at the age of 35, then the amount saved would be just over P900,000 and, if invested with a 3% annual return rate, the final amount would not exceed P2.9 million.

Financial instruments for retirement are not famous for offering very attractive returns, as they are usually low risk. To speed up and diversify your investments, you can also open an account with a broker and start trading various financial instruments. There are many online brokers that you can choose from to trade currencies, commodities, crypto, indices, and other assets. Look for one with the best conditions, such as low spreads, no commissions, fees, or swaps. Your trading objective would be to grow the initial capital, so it is essential to have a good understanding of the market. You can watch educational materials and practice trading using free demo accounts.

As an additional option for your early-bird portfolio, consider investing in housing. You may rent it out or use it yourself. While you are still in your 20s, you can easily get an attractive mortgage option with low monthly payments. The challenge, of course, is to make an initial payment.

Investing when you are 30+

The 30s are the age at which the growth of personal finances should be accelerated. In addition, you should continue to contribute to your retirement investments. If you have not started saving for retirement by now, you should start as soon as possible. No matter how small the amounts you set aside, this should be done on a regular basis.

At this point, chances are that you have children, so any disposable income may have been reduced. Not only do you have higher expenses, but you should also consider investing on behalf of your children to meet their future needs, such as quality education and housing.

At this age, you can start diversifying your investments. A common way to do this is to invest in real estate. This is considered a conservative investment option because of its relatively low risks and the fact that the real estate market is growing most of the time. Apart from it, real estate can become your source of passive income, should you rent it out.

Another option that always stays relevant is financial market trading. If you started investing this way when you were young, by now you are probably enjoying a well-balanced portfolio composed of multiple types of assets that gives you a steady stream of income.

Why start now?

If you don’t invest now, you’re risking having a lower quality of life in the future, especially during retirement. You have more time and energy to learn such complex spheres of life as finance and investment. You may make mistakes and even lose some of your capital now, but those mistakes will teach you important lessons that will help you build your future financial well-being.

Start your journey by being part of OctaFX:

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Editor’s Note: This article was provided by OctaFX.