How many people do you know that are actively investing in shares?
Maybe one or two, if any at all. New Zealanders tend not to be heavily into investing. Especially the younger generation.
Sharesies have stated that the whole purpose of their initiative is to make investing accessible to anyone and everyone. They wanted to find out about the investing habits of New Zealanders so that they could serve us better.
When Sharesies and Smartshares partnered up to discover the investment habits and attitudes of kiwis, they found that only 9 percent of kiwis under 30 own shares, as opposed to 30 percent of Kiwis over 60.
Why is that?
They found that the main reason for the lack of investing in youngsters is that they simply don’t know how to invest. They aren’t clued up as to how it all works and therefore lack the confidence to dive in.
While people of all ages can profit from investing in shares, there are so many benefits to starting young.
Let’s look why that is…
Why Investing in Shares Young is Great for Your Financial Future
Time is on your side
While you can be smart about investing and decrease the risks, markets do fluctuate over the years. Sometimes you will find yourself up, other times you will be down. The key is, if you have good diversification and the patience to sit out these changes, your investment will grow.
Starting young gives you more space to allow your investments to grow over time. If you start saving for your retirement in your 20s, you’ll be happy to take more risks (and earn more rewards long-term), letting your money ride out any rollercoasters over the next 40 years. Starting in your 50s, will mean you need the money sooner.
So you are more likely to invest in lower-risk, stable shares that don’t produce high profits.
Interest upon interest
Compound interest is the magic phrase for investors. It can grow your money exponentially – even if you stop adding money, it will continue to expand. But the key here is time and patience.
Shares don’t pay interest, as such, but the idea is the same. Although, in theory, someone in their 50s may have more of a nest egg to invest, being young means you have more time, and time is a valuable asset.
Imagine you buy shares for $100 and they increase in value by five percent in the first year, so they are now worth $105. The following year, they increase by another five percent, but this time, it’s five percent of $105, netting you more money.
If this trend continues year after year, the interest acts upon a bigger total each time. This is compound interest.
The more you have, the more you earn, and time is your friend.
Investing in Shares – Learning by doing
Scared about investing in shares because you have never done it before and don’t know how? Think about it, if you approached everything in life with that fear of the unknown, you would still be crawling instead of walking!
The best way to learn how to do something is to start doing it. Sure, you can read books and listen to podcasts to get a bit of background, but nothing teaches you the ins and outs as well as giving it a shot does.
The beauty of using something like Sharesies is that you can start with as little as $5.
You can dip your toe in the water and experiment with low sums until you get the hang of it. And, you get your first month free!
If you are young when you delve into the world of investing in shares, you have plenty of time to take it slow, figure it out, and learn how to bounce back from your mistakes.
Start with the money you have, experiment a little, teach yourself how it’s done, and then dive in with bigger risks when you build more confidence.