Isn’t investing risky?
Yes and no. There is always risk when you invest, but there are also risk in putting your money under your pillow! The risk called Inflation will eat away your wealth if you did not invest it.
So why should you invest now?
As a young adult/student, you can hold your investment for a long period of time, allowing you to take on more risk for higher return. This also means that you can withstand an economic downturn and wait for the market to recover.
The easiest way to explain compound interest is that your money will earn interest and your interest will also earn interest. This allow your wealth to grow faster and if you start early, your investment will be compounded for a longer period, creating more wealth for you!
Try this Compound interest calculator to see how much would you have if you were to invest your money!
Choosing the right investment for yourself
As an investor, you should understand the triangle of investing. It consists of risk, return and liquidity. By applying the triangle to your investing decision, it will help evaluate which investment is more suitable for you!
If an investment promises you of high return, it is usually accompanied by high risk and low liquidity. If an investment promises you low return, it is usually accompanied by low risk and high liquidity. If someone promises you an investment that is high return, low risk and high liquidity, you should be skeptical and stay away from such investment!
Misconception about investing
You need a large amount of capital to invest.
With robo-advisor coming into the investing scene, you only need as little as $1 to invest! So, what is stopping you from investing?
It is very risky.
There is risk associated with investing but putting money under your pillow is also risky as well! The risk associated with investing can be reduce by knowing what you are investing in. “Risk comes from not knowing what you are doing.” – Warren Buffett.
You do not need to invest if you are young
As mentioned earlier, the earlier you start, the better! You will be able to have the benefit of time and compound interest to help grow your wealth. As a student, you have all the time in the morning as compared to when you start working, so start investing!
The bottom line
Investing is not as risky or complex as you think it is. The earlier you start, the better as you will be able to take advantage of the time horizon and allow your investment to compound. With so many different investing tools, you just have to select the right investment tool and you will be able start with just a small amount of money.