Earning from a very young has its advantage especially when you are 18 years old. You have ample time in your hands to make money and use that surplus for investment which gives a great head start for life. Investment at an early age is deemed to be fruitful. Age is never a barrier when it comes to investing. The earlier you invest the better your opportunities grow and the richer you get. Not just that, you learn the vital meanings of financial independence and disciplined savings. It’s a process of hard work and wise investments for safeguarding your retirement as well as a teen.
There has been a consistent rise among Gen Zs in attaining financial independence at a very young age. For instance, the vast majority of GenZs are using social media platforms to become content creators, and influencers, and share their experiences with their viewers which in turn helps in making money. Or many are emerging as tech-savvy, while some join as interns in companies or do some social events during their education period. These are some of the opportunities that GenZs use for lucrative income. Such has led to an increase in investment interests. Stocks and cryptocurrencies are some of the investment pools that GenZs are exploring.
Generation Z (Gen Z) is referred to as the millennials born from the late 1990s to the early 2010s.
Uttung Malkan, Country Manager, TIFIN India said, “Over the past few years, we have witnessed a growing trend amongst Gen Zs to attain financial independence at the earliest which has led to a surge in investment interest. Inculcating healthy financial habits early on gives young individuals a headstart in life.”
According to Malkan, timely investments, savings and budgeting can help young individuals safeguard their finances and chase ambitious goals freely whilst being financially independent.
Three important steps for financial planning:
In Malkan’s opinion, three important elements need to be noted for planning one’s investments as a first-time investor.
1. The initial step is to understand the power of compounding and the magic it can do to your investment portfolio. Compounding is the process in which an asset’s earnings, from either capital gains or interest, are reinvested to generate additional earnings over time. This sort of reinvestment leads to high returns in the long term.
2. In the process of investing, the second most important step is to understand one’s risk-taking appetite. Risk appetite simply put, is the amount of risk you are willing to accept while investing. For instance, an investment option with a
high loss/high-profit riff-off would be deemed as a “high risk” investment.
Malkan said, “one should always keep in mind that chasing instant gratification and high returns may not always be the best
investment plan in the grand scheme of things. It is always advisable to invest in stable long-term return plans for sustained wealth.”
3. Finally, it is important and imperative for first-time investors to diversify their investment portfolio as much as possible. Diversification is one of the core maxims of risk management and yet is the most overlooked by first-time investors. It is critical for individuals to start with a diversified portfolio in order to remain on the path of improving their financial wellbeing.
How to invest:
“Diversification is a simple concept – “don’t put all your eggs in one basket”, but instead spread your money across many securities to reduce the risk. A truly diversified portfolio should be diversified across asset classes, regions, sectors, and individual securities,” Malkan pointed out.
Highlighting a few investment options, Malkan said, “there are several ways to diversify one’s portfolio, like investing in
Exchange Traded Funds (ETFs), a type of pooled investment security that operates like Mutual Funds and another option is investing in Mutual Funds.”
He lastly concluded, “All in all, it is crucial that young individuals take control of their personal finance by taking considerate time to plan, budget, and invest their money, keeping in mind the 3 essential tenets of investment in order to attain financial independence and security early on in life.”