The real secret (in my opinion) to successful investing is to start early, and focus on boring investments. Young professionals are in a unique position to start investing early and have time on their side. This is helpful for two reasons – first being that they’ll be able to manage the natural ups and downs of the market. Secondly, investing now will allow compounding to take effect – meaning little by little it’ll grow and keep growing. Investing can be daunting for the new investor, and there’s a ton of noise out there telling you how to invest your money (hint – cryptocurrency might not be a good starting point for you). Let’s dive into a few tips for the newbie.

Begin Investing as Soon as you Can

The sooner you start investing, the better, for the two reasons mentioned earlier. I always say that for young professionals, it’ll never be easier to invest than it is for you right now. In the future, you may have kids, a spouse, a mortgage and even a car to pay for and this can make it very difficult for you to spare any kind of money for investing. If you want to help yourself then starting putting away a set amount of money every single month. When you do this, you can then have a steady fund to consistently invest in the market, taking advantage of any natural ups and downs that may occur.

Investing now will also allow compounding to come into play. Investing a little each month will slowly start growing, and then that larger balance will grow even more in the future. Keep your money invested and focus on the long-term!

Educate Yourself

Investing blindly isn’t wise, and although I don’t expect you to spend all of your free time researching your investments and the market overall, having a base understanding is smart. You’ll need to understand the type of business that you are going to be investing in. If you feel that a certain sector (i.e. technology) is going to be big in the future, read up on it a little bit. Learn the overall trends and future predictions, and which companies are top performers. Real estate investing; whether for a personal residence or investment property requires research as well. Learn about the area and trends with the neighborhood you’re looking into If you want to invest in property, then check out these new mortgage rules simplified. Real estate has a ton of tax benefits but it takes a little research to make sure you take advantage of them! By educating yourself, you can be sure to make the best decision and you can also boost your chances of success.

Stocks and Bonds

If you are a young investor then there is a high chance that you will be able to choose between stocks and bonds. Stocks are far riskier, but they do give you more room for profit. Bonds on the other hand have an advantage over stocks, and that’s because you have promise from the borrower for payments.

In my opinion (and the opinion of most financial experts), stocks are where you should be keeping your money. Young professionals have time on their side, so invest in stocks and hope for a better return in the long run.

Save

A good investor balances their portfolio and doesn’t put all of their money into stock market investments. Utilize a savings account for various saving goals (i.e. grad school, down payment for house, emergency fund) and keep that money safe in a saving account where it’s guaranteed. Make sure you’re keeping it in a high yield savings account, which more and more banks are offering. If you’re not getting at least 2% interest, shop around!

Managing Debt

Some people make a habit of spending money based on their income in the future. What we can’t afford now we’ll be able to afford in the future we tell ourselves. This is a mistake because anything can happen and we don’t know the future! If you want to protect yourself then you need to make sure that you only spend money that is in your account, right now (which is Cardinal Rule #1 – don’t spend more than you earn).

When you do this, you will become a much smarter investor and you will also learn the value of money much faster. If you invest money that you don’t have then you run the risk of growing debt and this will offset any investments that you have made (so don’t do it). It may even cause you to pull out of investments too early as well, and this is the last thing that you need if you are planning on investing for the long-term, such as ten years or more.

The time value of money can either make you very rich or very poor. Work to minimize debt (especially the bad kind – i.e. credit card debt) and maximize your investments.

Best of luck starting out with your investing journey! Remember – start sooner rather than later and keep it simple! A good index fund will be safer and likely have better returns than other flashier investments!

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