Investing at a young age can be a great way to start building wealth early in life. By starting early, you can take advantage of the power of compounding and give your investments more time to grow.
Getting started with investing can be overwhelming, especially if you’re just starting out at 18.
In this article, we’ll cover the basics of how to start investing at 18 and some tips to help you get started on the right foot.
Set your financial goals
Before you start investing, it’s important to identify your financial goals. What do you want to achieve with your investments?
Do you want to save for a down payment on a house, pay off student loans, or save for retirement?
Setting clear financial goals will help determine how much you need to invest, your attitude towards investment risk, and what type of investments are best suited to your needs.
Develop a budget
One of the most important things you can do to set yourself up for successful investing is to develop a budget.
A budget will help you understand how much money you have to invest each month and where your money is going. By tracking your expenses and income, you can identify areas where you can cut back on spending and free up more money to invest.
The more you can save, the more you can invest!
Start small
If you’re new to investing, it can be tempting to put a large amount of money into the market right away. This can be risky – especially if you don’t have a lot of experience with investing.
Instead, start with a small amount and gradually increase your investments as you become more comfortable and experienced with the process.
It’s also wise to build a small rainy-day fund before you invest anything. Try to save up 2-3 months of living expenses in an easy to access location, like an online savings account. This way, you don’t have to dip into your investments every time you’re short of cash.
Open an investment account
Now you’re ready to start investing, the next thing you’ll need is an investment account.
There are several types of investment accounts to choose from, including individual brokerage accounts, retirement accounts, and college savings plans.
Each type of account has its own rules and restrictions, so it’s important to choose the account that best suits your needs and goals.
Risk Vs. Reward
When it comes to choosing investments, you need to think about two important aspects: risk and reward.
How much risk are you willing to accept? How much reward do you want from your investments?
A low-risk investment with a high reward is usually the goal; but they’re not always easy to find.
Each asset has its own risk level, so it’s important to understand what you’re investing in before you hand over any cash.
Diversify your investments
One method of reducing risk within your portfolio is to diversify investments into different assets classes.
By spreading your investments across a variety of asset classes such as stocks, bonds, and real estate, you can reduce your overall risk and improve your chances of earning consistent returns.
Make sure to diversify your investments across different industries and sectors as well to further reduce your risk.
Educate yourself about investing
Something that is overlooked by a lot of young investors is education.
Investing can be complicated, and there’s a lot to learn if you want to be successful. Start by reading books and articles about investing, attending investing seminars or webinars, or even taking a course on investing.
The more you know, the better equipped you’ll be to make informed decisions about your investments.
Be patient
A hard to learn fact every investor needs to understand; getting rich quick does not exist. Investing is a long-term game, and it’s important to be patient.
The stock market can be volatile, and it’s not uncommon for investments to experience ups and downs.
Over the long term, the stock market has historically delivered solid returns. By staying invested for the long term and avoiding the temptation to get rich quick, you can give your investments the time they need to grow.
Avoid high-risk investments
While high-risk investments can be tempting, especially if you’re looking to earn quick returns, they can also be very risky.
High-risk stocks like Tesla and Nvidia, or speculative cryptocurrencies like Bitcoin, can be very volatile and can result in significant losses.
As a beginner investor, try to focus on lower-risk investments that can help you build a solid foundation for your portfolio.
Stay disciplined
Investing can be emotional, and it’s easy to get caught up in the excitement of the market. But it’s important to stay disciplined and stick to your investment plan.
Avoid making emotional decisions and instead focus on your long-term financial goals. By staying disciplined and sticking to your plan, you have much higher chances of success with your portfolio.
Seek advice from a professional
If you’re feeling overwhelmed or unsure about how to get started with investing, consider seeking advice from a professional.
A financial advisor or investment professional can help you develop an investment plan that’s tailored to your needs and goals, and there are hundreds out there ready to help.
Final Thoughts
Investing at 18 is a great opportunity – time is on your side.
You now have the power to take control of your financial future. But, there are some important factors to consider with your investments. Starting small, staying disciplined and remembering to diversify are all key to being a successful investor.
If you do your research, learn as much as you can about investing and manage your risk properly you can set yourself up for a very bright financial future.
