Investing for Young Adults: Best Investments to Make
If you are a young adult who is looking to invest but does not know how to get started with investing, you are actually not alone. Most young adults face the same issue. What should be more important to you is discovering the best investments to make and getting started.
Recent research has shown that most young inexperienced investors tend to dive into the world of investing with a high level of confidence which gradually wanes over about two decades of investing as they encounter bad and hard times in their investments.
But Yosef Bonaparte, an assistant professor of finance at the University of Colorado at Denver, and author of the research. Points out that this lost confidence is restored after building so much experience in the effort.
He wrote in his study, “after decades of investing experience, the effect of bad events diminishes (it’s called the desensitization effect) and investors then take more risk and become less pessimistic and regain their overconfidence.”
Investing for young adults is often a very interesting experience, but if you need the best investments to make, this article will help to guide your investing decisions. Here are the best investments to make as a young adult looking for a brighter future.
1. Improve your skills
One of the best decisions you can make on your investment goals is increasing your value by improving your skills. The exposure and knowledge you will gather from deliberately improving your skills will give you an edge on your income, which you can increase to get even more valuable.
Put some time and money to work to acquire the needed career skills. You may also want to consider skills you want to help you be fit for a high-paying job or even to switch career choices.
You may want to take online courses, enroll in diverse educational programs that will improve your skills. The cost may be high, but if it is something you need to qualify you for huge profits in the future, then it is an investment that you must never throw away!
2. Young adults should consider investing in real estate
Real estate is one of the most rewarding investments young adults can make around the globe. While traditional mortgage investors generally require a down payment of around 20% to 25%, some situations often require just 5% to acquire a full property.
The ability to control the assets after signing papers makes it easy for both landlords and real estate flippers who can take out second mortgages on their homes to make down payments on more properties.
As an aspiring real estate investor, you can make money by buying properties using leverage, making an initial part payment, and then sorting out the balance over a specific period of time.
You can also earn as a flipper. Flippers in real estate buy properties that are undervalued, fix them, and resell at much higher prices. Real estate investment trusts (REITs) and real estate investment groups are other investment means. But the largely harnessed method is to become a landlord and rent out your properties.
3. Buy a fractional share of a stock or ETF
Exchange-traded funds (ETF) or company stock can offer young adults more hands-on on their investing. You do not have to acquire full shares of an ETF or stock these days, you can simply pay less for a portion of stock instead.
For instance, instead of paying say $500 for one Google share, you can just pay $20 for a small portion of that one share. You’ll still own a portion of the company with fractional shares. But then, there are some investment companies or brokers that will not offer you fractional shares. Make proper findings before going ahead.
4. Mutual funds make investing easy for Young
Mutual funds investments are investment tactics that give you the opportunity to pool funds in mutual funds with other investors to acquire bonds, stocks, or other securities that would have possibly been difficult to put in place on your own. The cost of mutual funds is determined by the entire value of securities in the portfolio divided by the total fund’s outstanding shares.
The cost varies as determined by the value of the securities in the portfolio at the closing of each business day. Investors own the shares in the fund and not really the securities in which the fund invests.
5. Clear out your debt
Students are often faced with debt situations. And while the average loan amount in 2019 is put at $33,000, there are several young adults that have other debts such as car loans and credit card debt to sort.
These debts may have occurred for a good reason, but they’ll keep reducing your cash flow as long as they remain unpaid. So, if you earn $10,000 in a month and you have $1,500 being deducted over debts, you’ll have only $8,500 left in the month.
If you are sorting out debts and planning on investing at the same time, it is important that you find a workable balance to avoid pressure on your finances. While you may just think that you could pay a minimum payment on your debts and pay the rest into your investment plans to take advantage of the compounding of income offered by various investments, but you should also be aware that returns on investments aren’t a full guarantee. But be sure that your debt will remain steady!
So, even if for instance, you have run into a 25% loss on your investments, your car loan of 8%, student loan of 9%, and credit card loan of 15%, your debts must still be paid despite your investments losses. In essence, paying down your debts is always one of the best investments to make. Target your credit card first, their interest rates can be huge even though they may seem small.
6. Invest using Robo Advisors
If you are uncomfortable with your investment decisions, then consider investing through a Robo advisor. Robo advisor is an online platform for investors, with all their investments being carried out in an automated system. They can reinvest dividends from stock, rebalance your portfolio periodically and also provide you with a strategist you can harness to reduce your taxable investment gains.
Robo advisors are great for retirement accounts or taxable investments. Simply fund your account and the Robo advisor takes over all the details for you.
Final thoughts
Your limited income isn’t going to make it easy for you to spread all your earnings into all the investment ideas for young adults. But you could just pick one or two that could help you focus properly. When you invest early in your life, you’ll get the best of investing, grow your income, and your options will be broadened as the future unfolds.