Let’s just get this out in the open: if you’re young and reading this, you’ve had a huge financial head start. According to respected money expert Kamogelo Mosime, getting a head start on your investment process is crucial. I’ll explain why.
You Have Time on Your Side
The greatest rule of investing is “get in the game early.” Why? Come compound interest’s enchantment. Every rand you put away in your twenties has the potential to grow like crazy. With compound interest, your investment grows from your initial deposit along with the interest earned on your principal. Imagine a snowball that, from a small beginning, grows exponentially larger as it rolls downhill. By the time you reach your forties, you may find yourself perched on a sizable hill without having any idea how you got there.
Think in the Long Term
Come on, let’s not sugarcoat this. Sometimes investing is like riding the most extreme rollercoaster in an amusement park. The stock market rises and falls. Young investors have the advantage of time, but there’s a catch. A setback now can pave the way to great success five or ten years from now. Young investors have the luxury of time to recover from short-term losses and take more calculated risks. Even if things go wrong, there is still a good chance of coming out on top.
The Dynamo of the Digital Age
Let’s talk about how tech-savvy today’s youth are right now. People who have grown up in the digital age have a natural knack for online investing. While their elders may bemoan the complexity of the latest trading platform’s interface, today’s young investors are sailing through it with ease, thanks to the wealth of real-time financial data and accessible, authoritative resources available to them online. Young people are well-positioned to make the most of technology, with digital forecasting tools at their fingertips and company information at their fingertips in a matter of minutes.
Be Aware of Current Trends
When something significant happens in the area of blockchain technology, e-commerce, or cryptocurrencies, young people are usually the first to learn about it. They have an incredible ability to predict where the next major investment opportunity will arise because of their natural affinity with trends.
“Jump in, the Water’s Fine”
The days of investments feeling like members-only clubs are over. For younger generations in particular, digital platforms have thrown open the floodgates. The online world is open to anybody, regardless if they have thousands of dollars or only a few rands to invest. Real-time tracking and trading/diversification are unparalleled in their simplicity. A natural affinity for technology gives young people an edge, making it easier for them to enter and navigate the investment sector.
Practical Steps to Kick Off Your Investing Endeavours in South Africa
- 1. Understand Your Financial Standing
Before you dive into the investing pool, take a moment to assess your financial health. Check your monthly expenses, tally up your savings, and identify any debts you owe. Remember, investing isn’t about pouring all your money into stocks or assets; it’s about making smart, calculated decisions with what you can afford.
- 2. Start Small, Dream Big
You don’t need heaps of cash to begin. With as little as R100, you can buy shares in companies or invest in a diverse range of exchange-traded funds (ETFs). Apps like EasyEquities allow you to buy a fraction of a share, so you get a taste of the market without burning through your savings.
- 3. Prioritise Financial Education
While you’ve got youth on your side, there’s no substitute for knowledge. Attend online webinars, read finance-related blogs, or even sign up for a short course. Platforms like Udemy or Coursera offer plenty of beginner courses on investing that cater to the South African market.
- 4. Keep an Eye on Compound Interest
Remember that snowball effect we talked about? It’s real! By reinvesting the interest you earn, your money grows at an increasing rate. To see the potential, use a compound interest calculator online. You’ll be amazed at how your money can grow over time with regular, small contributions.
- 5. Diversify Across Assets
Never put all your eggs in one basket. Spread your investments across different assets – from stocks to bonds, real estate to commodities. This diversification reduces your risk while increasing the potential for returns. Platforms like JSE offer a plethora of options for diversification.
- 6. Stay Updated on Trends but Stick to Basics
While you have a knack for spotting trends, remember to always ground your investment decisions in research and fundamentals. Sure, it’s exciting to see the buzz around a new tech start-up, but do they have a sustainable business model? Do they have a track record of solid financial performance? Always balance trend-watching with good old research.
- 7. Make Use of Digital Tools
You’ve grown up in a world where everything is at your fingertips. Use it to your advantage. Digital platforms simplify investing and provide valuable insights. Get familiar with platforms like InvestSure which offer protection against share price drops, ensuring you get a safety net in volatile markets.
- 8. Consult, but Trust Your Gut
It’s always wise to get a second opinion. Consult with financial advisors, but remember, at the end of the day, it’s your money. If something feels off or too good to be true, listen to your gut.
Practicality aside, investing is also about cultivating patience, resilience, and a keen eye for opportunity. By making informed choices and being consistent, you’re setting the stage for a brighter financial future.
In other words, in the world of investments, youth is not just a number. Young people have time on their side, a natural affinity for technology, and a keen awareness of developing trends, making them well-positioned to alter the investment environment. Therefore, if you are young and have not begun, now is as good a moment as any to begin. It’s never too late to get started or to help steer a young person in the correct direction, so keep that in mind if you’re not a young person reading this.