Everyone knows investing is the key where millionaires make their money.

But only a few knows,

investing young is how you become a millionaire.

The secret is, young investors have a few great advantages that most investors nowadays wish that they know when they are still in their 20’s, or still studying in colleague.

The worst mistake I have done in my investing journey is to start too late. I brought my first stock when I am age 26, where I should have started investing when I reach my 18th birthday.

You should start your investing journey even if you are still in colleague with just over $1,000 to invest. Earlier you start investing, greater your advantage.

Even if you are in your 30’s now, it is still not too late to start. In fact, you should start right now!

And here is why!

5 Reasons You Should Invest Young

Amount many of the different reasons that investing young is the best thing you do for your financial future. Here are the 5 best reasons investing young gives you a major advantage over all other investors

Here are the 5 Best Reasons Why You Should Invest Young:

  1. Higher Risk Tolerance
  2. Gain Experience
  3. Time is Your Friend
  4. Tech Savy
  5. Secured Future

1. Risk Tolerance

An investor who just finished colleague and is in their 20’s, will invest very differently from another investor who is in their 50’s preparing for their retirement.

A young investor have a much higher risk tolerance and are capable on taking much more risk than a older investor.

Why is it so?

Old Investors

An old investor who have work 30 to 40 years of their life will have a 5-figure to a 6-figure invested in stocks. These investors are nearing their retirement age, any mistakes in their investing will greatly impact their retirement plans.

Their life long savings will be at sake for every investing decision they make.

Thus, an older investor will only have the option to invest in safer alternative such as blue chip stocks and Exchange Traded Funds (ETFs).

Their risk tolerance is low.

Young Investors

On the other hand a young investor who have just finished colleague, or just started working will only have a few thousand dollars to invest in stocks. These investors have years ahead before they will be reaching their retirement.

Even if they loss all they have invested, they can earn it back pretty quickly (no, I am not asking you to loss money, it is just an example of the worst case scenario).

Thus, a young investor have the option in invest in slightly riskier alternative, such as technology stocks, growth stocks and other stocks with a lower market cap.

Their risk tolerance is high.

2. Gain Experience

Experience is what makes us grow to be stronger and wiser. Young investors have the opportunity and time to read more books about investing and learn from the pros.

Learning to invest is done by 2 different ways:

  1. Reading and learning from other’s experience
  2. Doing and learning from your own success and failures

Although learning from the experience of other through books are very important. Sometimes learning by doing the investing itself is just as important.

With all the knowledge you have learnt, practicing what you have learn will help you to understand the process better. And even if you have done any of the steps incorrectly, or have brought a bad stock.

Learning from your failures can make you grow wiser as a investor.

Warren Buffett, the Billionaire investor whom have become the 3rd riches person in the world take lessons from his own investing mistakes and learn from it as well.

Investing at the age of 11, Warren Buffett learn that when he buys a great stock, he should let it grow in value and not to panic sell after getting a slight profit. With every year he invested, he grow his knowledge on investing. Eventually, by investing young he have become a Billionaire.

You may or may not be able to become a Billionaire in the future.

But investing young will definitely allow you to be wiser in investing and eventually become successful in investing.

3. Time is Your Friend

Time is the key ingredient that makes investor rich. When you are young, you have time at your side. And with time, you will have the 8th greatest wonder on earth as your friend in investing.

If you have guessed it, your friend’s name is,

“Compounding”

Time is the key where Warren Buffett and many other investors are so rich. Time is essential for the power of compounding to take place. And with more time on your side, the more you can compound your returns on your investment.

Albert Einstein have famously quoted:

“Compounding is the eighth wonder of the world.

He who understands it, earns it. He who doesn’t, pays it.” 

Want to know how powerful compounding actually matters for your return on investment?

Let’s have a look at the following example.

Example on Importance of Compounding

John and Jane are of the same age:

  • Both invested $10,000 in the same stock call ABC Company.
  • ABC company gives 10% return on investment every year from year 2020 to 2050.

John: invested $10,000 in the stock at age of 20 in the year 2020.

Jane: invested $10,000 in the stock at age of 30 in the year 2030.

Both John and Jane sell of their stock when they are 50 years old in year 2050:

  • John received $164,494 in year 2050.
  • Jane received $67,275 in year 2050.

John received $164k, which is almost 3 times the amount Jane received which is just $67k. Just 10 years difference in the compounding interest have made John 3 times richer than Jane.

This is the power of compounding.

4. Tech Savy

Young investor are almost always ahead of the trend of the newest investing resources available on the web.

These online resources and online trading platform gives its users countless research tools for both fundamental and technical analysis.

Tools which was only available to big brokerage firms are now available at the touch of our finger tips.

Young investors, especially those whom are tech savy will have access to research tools that older investors have never heard of. Thus, giving these smart young investors advantages over many other investors who are much more experience.

Furthermore, young investors are given the opportunity to learn investing not only from books, but also socially from other investors who are available through social media and chatroom.

Being tech savy, have open many doors of opportunities for young investors. This is a major why you should start investing when you are young.

5. Secure Your Financial Future

Invest young so you can secure your own financial future is probably the main reason why you should even start investing.

There are times in life that you will urgently need money. It can be for your kid’s education, or to fix that broken window.

At a early age, you have little to no financial burdens. But as you grow older, you will start a family and buy a house etc. The the household expenses will depend on you. Paying your mortgage, kid’s education and car loan are just some of the few expenses you cannot run away from.

Most of the time, after paying all the essentials, you will have couple of hundreds to a few thousands for savings or investing.

(PS. If you have trouble saving money to invest, probably you can check out this article which teaches you how to save $10,000 in one year.)

Investing young give you to have an head start over your peers, which usually is the reason why some are rich and some are not.

Having a bigger nest egg earlier gives you a bigger financial buffer, which allows you to secure your own financial future.

Eventually, this will help you to prepare for your retirement.

(PS. Emergency fund can also helps you in securing your financial future, read our articles on how to create emergency fund and rainy-day fund to learn how)

My Takeaway

Start investing, start young is the key to your financial success. With so many advantages of starting to invest while you are young, I can’t see why procrastination on investing will do you any good.

If you have not started investing now. You really should. I have regretted that I have started my investing journey too late at age 26. I don’t want you to do the same mistake as what I have done. Because of these 5 reasons.

5 Reason Why You Should Invest Young:

  • Higher Risk Tolerance
  • Gain Experience
  • Time is Your Friend
  • Tech Savy
  • Secured Future

But if you are still unsure, you can check out my other articles on investing.

Knowledge

Knowledge is what differentiate a successful investor from a gambler. Successful investors like Warren Buffet is successful, because he have the right knowledge to make the right decision to buy or sell a stock.

Combined with the right investing knowledge and your advantages of being young. You have the potential of getting a nice profit from your investment.

Successful investors like Warren Buffett read approx 500 pages a day.

Knowledge on investment can be learn from books or articles like this one. Reading can only make you wiser and smarter, so that you too maybe able to make the right decision in your investment.

Will Durant Said:

“Education is a progressive discovery of our own ignorance.”

 

My Library

Best Collection

Here we have selected a whole library of some of the best books you should read to learn more about financial education.

You can Visit My Library to explore some of the best books in life.

Trust me, it will definitely be worth it!

PS. We love writing these articles because we want to help each other in our financial success. It is our mission to help to educate others in their financial education. We may not be experts, but we love to document our journey on what we learn and share to others who may find it useful.

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Trust me, it will definitely be worth it!

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Disclaimer: I am not your financial adviser or lawyer, information found in our website are just my opinions. You should always ask your financial adviser or lawyer for any financial or law related advice.

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