How Should a Young Working Adult Invest and Save?

It’s early days, we don’t need to worry about saving for retirement. No, now is the ultimate time to start investing! If you know the power of compound interest you would want to start as soon as possible. The wonderful thing about being young is that you can take a few calculated risks. There is time to ride out the storm.

It is firstly of high importance that you invest money with a medium- to long-term return before you start taking such risks. Medium to long term investments must make up the bulk of your investment portfolio to hedge your finances against your high-risk high return short-term investments. Before you start to invest and save, draw up a list of preferences that you would enjoy from your investments or savings. Things like when you want the money to pay out and how much risk you want to take. This will help a long way towards identifying the type of investments that will suit your needs.

Diversify, diversify, diversify

Please remember to not put all your eggs in one basket. A diversified portfolio has the ability to save many financial budgets. Certain markets and instruments work with an inverse correlation. This means that as the one declines the other will incline. It’s obviously not smart then to invest in such a way that you leave yourself in an overall neutral position. Make sure that your investing takes into account the time you find yourself in so that you hedge yourself against the falling markets and take advantage of the growing markets.

What do you see?

Invest with a goal. Work towards something. Set out milestones towards your goals. An investment strategy without a goal will be hard to measure and compare. When you have established a benchmark of what you expect it will be easier to identify and change your underperforming investments.

Patience is an investment virtue

Patience is key. It could be that a particular investment is not performing the way you want it to. If you understand what you are investing in and you know it will increase in years to come – have patience and hold on to the investment. The saying goes that fortune favors the brave. Investment fortune favors the patient. It takes time for money to increase. The lower the risk, the longer you need to wait for that investment to increase.

Your other options

Savings Accounts are useful. They are however not smart investment options when their interest rates are lower than the inflation rate. The gap between an inflation rate higher than an investment’s interest rate will determine the value your many will lose over time. Before the Rand weakens it is also an option to invest in offshore investments. Just remember that when you invest in another currency and the Rand strengthens it will cause your investment in another currency to be of less value. That is of course if you regard yourself as a South African citizen with the goal to spend that money in Rands. You can make use of investment banks like Rand Merchant Bank and Investec. Other investment managers to consider are Prudential, Discovery, Allan Gray and Coronation to name but a few. Investing money will always have risk connected to it. It is that risk to a certain extent that drives the increase. That is why investing is sometimes referred to as educated guessing. It is hard to predict the future. So stick to people and companies that get it right more often than not.

Now is the best time to start, and yesterday will have been better

Don’t take advice from someone more broke than you. Follow those that bear the fruit (or the Rands) of safe responsible investing. Begin now, take action as soon as possible. It may never seem like the best time to start. You determine the best time to start!

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