Knowing what to invest in is the question. While there are numerous investment opportunities available, it can be hard to know which ones are worth your time and money. After all, when you start investing at a young age, you have to realise that you are playing the long game.
So where should you start?
Here are 6 valuable investments to start while you’re young:
1. Mutual Funds
You definitely won’t get rich on mutual funds. But, they will give you a platform to safely store your money while growing interest over several years.
Mutual funds are relatively low risk and provide the easiest options for diversification. Mutual funds are investment pools that allow you to combine your with other investors in order to access a wide array of stocks, bonds, and other securities.
Having your money split amongst different investment avenues (e.g stocks, bonds, and other securities) results in diversification. In short, diversification results in obtaining an investment portfolio that has money in several types of assets.
Also, depending on which types of mutual funds you choose, you have the option to pull out money with few penalties if you need it before a set retirement age.
While much of your mutual fund investment will likely end up in the stock market, investing directly in the stock market could also be a good move for young investors.
Because it is less automated, it can be a bit trickier and involve more research, but stocks provide you the opportunity to earn greater returns on self selected options.
The key to investing directly in the stock market at a young age is to avoid frequent trading and the day-to-day up and down of the market. Find stocks that you believe in and plan to stick with them for the long haul instead of making stock investment decisions based on what’s trendy.
3. Superannuation Guarantee
Many young people make the mistake of thinking they have all the time in the world to save for retirement. That sort of thinking leaves them putting off Superannuation investments.
Superannuation Guarantees are the most common types of retirement accounts in Australia. Take advantage of your super and any bonus’ that your company offers.
To get the most out of your Super, make sure to try and max out the allowed contributions in any year. Plan early so that you can allot this money for your future self.
4. Peer-to-Peer Lending
While it’s likely that you have heard of the aforementioned investment options, you might not be familiar with peer-to-peer lending.
Peer-to-peer lending is a lending process in which investors make unsecured personal loans to others in return for interest. The returns on peer-to-peer lending investments have yielded as high as 11% in recent years, making this a new go-to option for people who are disappointed in traditional savings account and bond rates.
Two of the most popular peer-to-peer lending platforms are LendingClub and Prosper. And while these platforms can offer much higher returns, they also come with increased risks. So, be sure you are saving conservatively in more secure investments in addition to your peer-to-peer additions.
5. Real Estate
There is always a lot of chatter about investing in real estate. However, when most people think of real estate investments, they automatically assume that they need to actually buy property.
That is not necessarily the case.
You can invest in real estate with much less hassle by purchasing real estate notes.
Real estate notes are essentially promissory notes in which the borrower promises to pay back their mortgage to the person who owns the note. The person who owns the note backs it with a lien against the property.
With real estate notes, you are still able to collect money (in the form of interest) on a property. If the mortgage owner defaults, you can sue for the deed to the actual property.
With all this said, the most important investment is: You.
Of course, this means different things to different people, but could include:
- Investing in education
- Investing in time to read and expand your general knowledge
- Invest in travel, holidays and new experiences
- Investing in personal enrichment
Attaining higher education will help you achieve greater earnings and give you the opportunity to invest more in various platforms. And while there is no diploma involved in reading and other personal enrichment activities, the knowledge found in these personal investments will prove invaluable as you take on new endeavors in your professional and personal life.
And remember, making time for travel, new connections and other life experiences is a key long-term investment. Experiences help enrich your life and will make all of that saving worth while.