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What age should I start investing?

I am a student and I am curious about how the stock market works. #career #general #professors #stocks #life #business #invest #finance #success #marketing


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Kim’s Answer

Kelly,

That's a complicated question. Ideally, one only invests money that they can afford "to lose." Or at least, can afford to live without. The earlier you start investing, the less you will have to invest, over time, due to the compounding of interest. So yes, you want to start early! But it makes no sense to be investing while paying 22% interest on credit cards. . . So strive to live within your means!

Before investing, you should have an emergency fund. That's money you use for unexpected things. Say, to pay the deductible on your car insurance if you get in a wreck. You should budget for irregular, but somewhat predictable expenses, such as Christmas shopping, new tires for the car, etc. An emergency fund should be enough to cover 3-6 months of expenses: rent, food, insurances, credit card payments, etc. I'd try to shoot for the 6 months. Job loss sometimes hits hard, and you want to be prepared for it, should it happen to you.

All that being said, it's a good idea to start SAVING, as opposed to INVESTING, right away. Put money aside to start building up that emergency fund. Put money aside, perhaps in a different account, for other things, such as school, Christmas, a car, etc. Also look into various insurances. The one I highly recommend is a good short and long term disability policy. Often times available at a reasonable rate from your employer, or, you can get one from an insurance company. It replaces a certain percentage of your income if you get sick or injured and are not able to work. Well worth the investment! I was in a bad car accident and missed several months of work. This policy helped!

By the age of 25 (preferably sooner!) you should be ready to start investing! Continue to keep up the emergency fund. When you use it, replenish it. The whole purpose of the fund is to allow you to "borrow" money from yourself, rather than paying to borrow it from others.

As you go through life, and receive raises at work, always increase your investments! (not with the whole amount, but at least some!) Be wary of "lifestyle creep." This is when your lifestyle changes with your income, and you can find yourself with less disposable income instead of more!

Hope this helps!
Kim

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Jessica’s Answer

I would suggest investing as early as possible. So many people don't realize that you can invest with the smallest amount of money. Investing can seem intimidating but there are so many user friendly apps that can help/ Stash is one that I use and it's super easy. You can also watch You Tube videos on the do's and don'ts of investing. Also, if you work for a company that has a 401k that matches your dollars go for it early. You would be surprised at how quickly you an accumulate your dollars. Best of Luck in investing!!

Hope this helps!!

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John’s Answer

Kelly before you can start buying stocks, bonds, and other investments, you need to invest in yourself. If your employer offers a retirement account, enroll in it, and start making the maximum annual contribution immediately. If they don’t, look for a retirement account that you can set up on your own. It’s also a good idea to build your emergency savings fund if you haven’t already. These funds can help you cover unexpected expenses that pop up throughout the year so you don’t have to rely on credit cards or loans. Make a plan to pay those debts down as soon as possible. Remember, the more debt you carry, the more interest you’ll owe each month. If you’re not careful, that interest can add up and you’ll end up owing your lenders more money than you spent. Get as much of your debt paid off as you can before you make your first investment. This way, your total income will grow and you’ll be able to use your earnings to further bolster your savings rather than paying what you earn to a third party. The biggest strain on peoples’ ability to save money in the first place is outstanding debt. Look at your credit card statements, personal loans, and any other debts you currently have.

WHEN SHOULD YOU START INVESTING
Yesterday. But if you haven’t started yet, today is a great second choice. One of the scariest things about making investments for beginners is the volatility of the stock market. When you see your funds temporarily go down, you may be tempted to pull your money and keep it in a no-risk savings account. In general, you want to start investing as soon as you have a solid financial base in place. This includes having no high-interest debt, an emergency fund in place, and a goal for your investments in mind. Doing so allows you to leave your money invested for the long-term – key for maximum growth – and be confident in your investment choices through the natural ups and downs of the market. Compound growth requires time. The earlier you start investing, the more wealth you can create with fewer dollars. When it comes to investing, time is your most powerful tool. The longer your money is invested, the longer it has to work to create more money and take advantage of compound growth. It also makes it far less likely that one harsh market downturn will negatively impact your wealth as you’ll have time to leave the money invested and recover its value.

Hope this helps Kelly

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Donavon’s Answer

The best answer we have found on this is to start investing as soon as you have an income. Depending on your situation the percentage of income that you should invest varies; if you are living at home with parents and have more disposable income you could be looking at up to 80% of your paycheck (with the caveat that you have some funds in savings - 15-20%), if you are living on your own and your cost of living is higher then you may start to look at 10-20% (ensuring that you saving as well), etc.

* If you are moving out on your own, be sure that you are living within your means and choose a place that allows to save and invest (make this part of the budget for moving out).

Donavon recommends the following next steps:

Where possible, save a year's worth of living expenses before moving out.
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Plan to invest at least 10% of your income with your initial budget and increase as you are able.
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Look into a "company match" 401K benefit with your employer and take advantage of the maximum benefits you are able.
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ETF gives a diverse portfolio mix with lower fees (compared to mutual funds).
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Look for any available resources regarding “investing” and learn the basics before engaging to any of it.
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Biju’s Answer

Lot of great answers already.

You should invest as early as possible. I would suggest you do a bit of homework before getting into it.

- Learn the basics about stocks, bonds, mutual funds and index funds. The key is to understand the risks associated with it. This helps you to quickly identify and stay away from risky bets.
- Learn about the power of compounding. In a long run, all investments are expected to grow.
- Learn about diversifying. As the saying goes 'Don't put all eggs in one basket'.

Investing is like a marathon, not a 100 m dash. Do it debt free, take small steps forward. I'm glad you are already thinking about investing - which is the first step well done. All the best!

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Ricardo’s Answer

The Best Time To Invest Was Yesterday, The Second Best Time Is Today

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Stephen’s Answer

There's a lot of great advice here already, so want to echo Kim's point about investing with money you can live without, Cameron's and Jessica's point about investing in a 401k, especially if a company matches, and John's advice about investing yesterday (but today's also a good choice).

Working with my financial advisor, we built a portfolio that invests in different markets, and I also participate in my company's stock exchange program. If it's within your means, I recommend working with a financial advisor on a long-term financial plan. Your bank might also have free resources that come with your membership, so never hurts to ask!

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Ganesh’s Answer

For the first question on the age of investing - it's now, if you are debt free. The fact that you are asking this question means you are aware of the financial rewards that can come along with investing in the stock market. If the idea is to throw that money to grow and focus on your life, I would highly recommend index funds and only invest the percentage of funds that you are comfortable with Invest periodically to negate the volatility in the market.

For the second question on how stock markets work - Please see below couple of recommendations if you would like to read them and listen to their summaries on youtube :)
Intelligent Investor - Benjamin Graham.
The Bogleheads' Guide to Investing

Ganesh recommends the following next steps:

Understand how stock markets work and make sure you are prioritizing making yourself debt free before investing
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Research on the path you want to follow - Index funds, Dividend Investing or Growth Investing and choose the investment vehicles
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Start investing in the index funds or stocks periodically ( once a month, maybe)
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Rebalance once couple of years if you see that the growth is not what you anticipated
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Now sit back and let your money show the power of compounding
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Cameron’s Answer

I would recommend investing as early as possible! Even investing just a small amount of money can be worthwhile.

I'm no stock expert, but investment websites like E*trade and Vanguard are great places to start! They make investing in stocks or mutual funds pretty easy to understand.

If you are working and your employer offers you a 401k plan, I would also recommend setting aside some of your paycheck to your retirement account. Even though your take-home pay will decrease, that amount you put aside will grow and help you in the future.

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Jim’s Answer

As soon as you can. Look at Fidelity index funds. They're low or no cost and require little maintenance. You can purchase index funds that mirror the S&P 500, NASDAQ, etc. There's a YouTube channel called Investing With Rose.

https://youtube.com/c/InvestingWithRose

I've watched a ton of videos on the subject and she's the best! She explains things in simple terms and covers many different subjects. I believe this is a good place to start. The sooner you start investing the better you financial future will be.

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Ahsan’s Answer

There's no age. Even from childhood the money you keep getting from your grandparents on occasions or birthday money, you can use it to buy something valuable for you, even that's investing. I remember I had saved PKR 6,000 when I was 10 and just like that, bought 100 USD from it, all because I had heard somewhere that it is the global currency so I wanted it too, and two years later, I wanted to buy a cell phone for myself so I exchanged it back for PKR 8,000.

One of my friends was encouraging us to buy bitcoins back in 2013, but I didn't bother to even check it out, so I missed out on that one. The pokemon cards that we used to buy back in school, have now suddenly become more valuable. I think if you spent money on a tangible item that is close to you or you simple like it, just try to maintain its life because if its valuable to you, so it is to a few others, so your time/money spent is investment as long as you maintain it.

At an early age, you care lesser about losing as you are more dependent on others, so that's the best time to overcome the fear of losing and learning the game of patience. It's never too late and never too early.

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Jonathan’s Answer

As soon as you have money to invest.

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Mohamed’s Answer

Great question. You should know that there are two things you need to consider before answering that question. Your knowledge and personality. There is no specific age where you start investing. You should invest when you are at that age where you become resilient enough to handle market turnarounds ,and have enough knowledge to understand and take good investment decisions. My advice to get into the habit of reading financial news and try a hypothetical portfolio and see how you perform to test yourself before investing actual money.

Hope this helps :)

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Simeon’s Answer

You should start investing when you don't have debt and feel like you have extra money to set aside. Check out the Robinhood app if you are looking to get experience with investing by getting into smaller stocks at first. Or you could look for an ETF; those are packages of stocks that are pre-designed so you don't have to work as hard to know every stock option out there.

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