Reader Question: I’m 18 years old and want to learn how to invest my money
"I'm 18 years old and want to learn how to invest my money" – John, SavingsPinay.ph reader.
Hi John! I am very much happy reading this email from my Inbox the other day.
I've always been open of how much I take age as human's greatest advantage. And reading your question make me feel so kilig.
You are 18 and you feel that excitement (hopefully) to learn more about investing your money. I made my first ever investment at 17 when I started my own event business. No money involved, yes, but through hard work and the belief that I have a God-given talent of being an emcee I became the youngest professional emcee to date.
At 19, I made my first investment on my portfolio income. It was through FAMI and I made tons of blog posts on this since then. It was a brave move since I don't know anything about investing.
I even don't have any back up money then and I just lost my job.
Read next: My Story, My Tips on Financial Management
Fortunately, 10 months from now my investments are all doing good. I even already diversified to other investments.
To answer your inquiry based on my mentioned investing story I believe there are three things that you could easily do to get started.
How will you invest if you don't have any money to spend too? If you are still a student then maybe you should focus first on studying. But if you are very eager to start earning and investing I suggest having income-generating sidelines.
Find online jobs and gigs that will not ruin your studies. Proper time management could help with this one. You can sell to your school or have a part time work in a fast food. The idea is that you need to secure your means first before investing.
Do your homework
The risk I took a year ago is not something that I want to let people be inspired of. I know it turned out better but still if I can go back I won't invest in a rush and prepare more. I paid my opening balance on the month of January but was just able to pay for my monthly top up on the month of April!!! I was 2 months delayed because I just got a new work and I need time to adjust with a much lower salary.
Read here: How I Got a Major Major Salary Increase
Expand Your Financial Knowledge
Read books and/or follow financial blogs that could give you vital information on how it is to become an investor. There are so many products out there that you can try so it is very important to select one that will benefit you for long term.
Remember that investment is not just about the bank and stock. Opening a business is a form of investment too, so is getting a real estate property for others to rent. You need to be open for more choices but selective enough on what to invest.
Final Notes from SavingsPinay
I did a post on How To Invest Your Money For The First Time and in the said post I mentioned six tips for first timers.
So, if you’ve been putting aside investing because you don’t how and where to start then below is a primer for you:
1. Get on Track with Your Finances
Before you try to invest for the first time you should first sort things out financially. You should know your current income and whether it could supply to your needs in addition to the investment you’ll be making. Yes initial investment is not that high but the actual money you’ll be putting as a top up matters. READ: Why You Must Know Your Financial Net Worth Now
2. Assess What Kind of Investor You Are
Next step is to know what type of investor you are. This will guide accordingly on the right kind of investment to make that will maximize your potential income.
There are Three Types of Investors
1. Conservatives or those who have low risk tolerance. They lean more on a portfolio that offers steady growth with low risk. They are easily swayed by negative news on surrounding the market and will need further explanation before making a financial decision.
2. Dynamics are people who have the highest risk appetite as an investor. They want capital growth through long-term investing. They do not get easily scared if they loss money for they remain positive that as long as they continue to invest things will change.
3. Balanced are investors who are a mixture of the two. Their risk tolerance is on a medium level. They love capital appreciation through investing in a long period of time but will still get fearsome in case things don’t go along their way.
Now there are three deciding factors that could determine what kind of investor you are namely age, years you want to invest and risk you are okay to take. In a normal situation, the younger you are the more time you have to grow your money and the more risk you are able to take.
As you grow older you have more needs and responsibilities in life that can lead to shorter waiting period for your investment to grow and lower risk you can take.
3. Choose Your Investment Vehicle
Once you have determined what kind of investor you are then it will be easier for you to choose your first investment vehicle. Conservative investors often go for time deposits, special savings accounts and government securities because they are a very sure type of investments.
Balanced investors love Mutual Fund and Unit Investment Trust Fund on Equities and Bonds. They may also choose investing on direct stock market but on very selected and established companies that already have proven track record.
Dynamic investors on the other hand are willing to trade on stock market or try non-traditional investment vehicle as a way of diversification.
4. Learn Your Investment Strategy or Style
Once you have chosen your investment you are ready to start investing. You will learn a lot along your investor journey from the right strategy to apply. I, for example have been a big fan of the peso-cost averaging method on my first mutual fund investments.
5. Assess and Review
Make sure that you always check how your investments are going. Review whether your portfolio still satisfies you as an investor. Withdraw your money in case something unwanted is happening or if you feel like the market is literally closing down on your set of portfolios.
The final step is to diversify your investments. Diversification is a financial technique that reduce the risk factor of investing by allocating your investments under other investment vehicles, other industries, and/or under other varied categories. In my Top 10 Most Important Lessons to Learn in Personal Finance Day 4 I mentioned the importance of diversifying your investments.
You can diversify among different financial vehicles, assets such as bonds and stocks and market values. Do not just put your money on a time deposit account but aim high to have your other money on mutual funds, stock market or even a real-estate property.
Do you have questions? You can send an email to firstname.lastname@example.org or follow me on Instagram @savingspinay.ph and use #AskIzza
Izza of SavingsPinay helps Filipinos bridge the financial literacy gap one content at a time by providing insights and tips on budgeting, saving, investing, side hustle and growing your net worth. Aside from this blog she also writes at www.izzaglinofull.com, a beauty and lifestyle blog for frugal Pinays and manages, www.izzagevents.com, a wedding and event business since 2011. For inquiries, topic suggestions or future collaborations email her at email@example.com