The best time to start investing is when you are young. The best time for learning how to invest is as early as possible. Here are a few thoughts about investment opportunities for young people, and as an example, how to invest $10,000.
Not What but How
Before thinking of a list of investment opportunities for young people let us think about how to start investing. Good first rules for investing are as follows:
- Be careful with credit cards
- Always pay off credit card debts
- It is hard to find investments that gain you more each year than the interest you pay on credit card debt
- Get an education
- because more education means a higher income
- Own you own home
- One of the best deals around is the fact that interest on your mortgage is tax deductible
- Start planning for retirement on your first job
- If your company offers a 401K plan, take advantage of it as soon as you can
- Start putting money into an IRA
- Learn about a Roth IRA versus a Traditional IRA and start putting money away each year
- Learn the basics of stock investing, investing in real estate, investing in gold and other commodities, and learn why one might want to buy insured municipal bonds instead of ordinary ones. You do not need to know all of this on the first day but educate yourself as you go and invest wisely.
- Diversify your investments.
- Some investments do well in some markets and others do well in others. Learn which is which and diversify your portfolio as you go.
Investment Opportunities for Young People
Because the first investments you make should be secure ones, buy bank CDs or invest in US Savings Bonds with each pay check. And remember the power of compounded earnings. If you invest $100 a month starting at age 25 in something that earns 7% a year it will be worth over a quarter of a million dollars when you turn 65! So, you have lots of years ahead of you and have purchased your own home, are not running up credit card debt and are feeding your IRA or 401K or both every year. What are some investment opportunities for young people that you can take advantage of? As the US economy expanded and new technologies came on line in the 20th century, people who invested in Ford, General Motors, American Telephone and Telegraph, Coca Cola, General Electric and others and did very well. Think about the 21st century and about technology innovators like Apple and Google, biotech companies, and offshore investment opportunities as nations like Brazil, Russia, India, China and South Africa repeat the American economic experience. Penny stocks may be appealing because you can, in fact, buy stocks for pennies. How to invest in penny stocks and make money is another matter. Low cap stocks which is what penny stocks typically are, are more risky than large cap stocks. As such investors expect a higher return on investment for taking a risk. The problem is that in order to cash in on the one penny stock that will grow a thousand fold, like Microsoft, you typically need to invest in as many as forty penny stocks as most will not do well and many will go bankrupt. The best bet with penny stocks to avoid them unless you have specific and very good information about the company. This brings us to our last two points regarding investment opportunities for young people. Learn very early how to do fundamental analysis of investment opportunities and remember the old adage that the first rule of investing is not to lose your money!