Unlock financial freedom: Investing for young adults

Investing for young people is not a far-fetched idea. Assumptions that young adults think more about the present when spending their money are exactly that – assumptions. South Africa’s numerous economic challenges drive many young people to prepare for the future by investing carefully.

If you’re young and looking to invest your money, you’ll know that technology has made investing much easier. Starting investments when you’re younger brings real advantages, even if you’re not earning much when you start working. There are some key benefits to investing from an early age.


You can use time to your advantage

Having time ahead of you to think about your budget and plan your investment approach is a big plus for a few reasons:

  • Compound growth means that small, regular investments can grow significantly over time. The earlier you start, the more time your money will have to grow.

  • You have time to research and track market trends without committing all your investments to 1 strategy, and you’ll be able to adjust your long-term investment portfolio if changing circumstances make certain financial instruments less profitable. 

  • Making sure that your investments grow over time needs sound financial planning and builds good money habits. Which kind of investments will work best for you over the short, medium, or long term? How will you use your medium-term investment returns – for a deposit on a house, to pay off a car, or to fund an overseas trip? As you answer these and other questions to plan your regular investments, you’ll learn to prioritise your financial goals and make informed decisions.

  • You’ll learn to calculate risk. Although investing is a tried and tested way to build long-term wealth, all investments carry some risk, and your predicted returns are never guaranteed. You can afford to take on more risk when you’re young, because fluctuations in the market are more likely to even out over the long term, giving you a positive return on your investment overall. When you’re older and have more financial responsibilities, a sudden drop in the value of a high-risk investment will have more serious consequences, so you’ll be looking for low risk on any new investments. This applies equally to taking an entrepreneurial risk and starting your own business as it does to investing in the stock market and other financial instruments. 


If you’ve decided to start your investment journey early, remember to speak to a financial adviser


You can start building wealth

As a young investor, the following tips could help you manage your investments more effectively: 

  • If you have high-cost debt (for example, a credit card balance that you don’t pay off in full every month), you should tackle that before you start investing large amounts. It’s also a good idea to start an emergency savings fund to cover your essential expenses – like rent, food, and any loan repayments – for a few months, in case you lose your job and need to find another. When the fund is big enough, you can redirect the amount you were adding to it every month into other investments.

  • Educate yourself. There are plenty of online and other educational resources out there to help you understand the basics before your start your investment journey. Consult a financial adviser to help you invest wisely.

  • Find mentors. There will be people you work with, or people in your profession, who have been through what you’re about to embark on. Don’t be afraid to contact them for advice and help.

  • Understand why you’re investing. Many young investors get caught up in the game of seeing returns and stock performances grow, while the companies they’ve invested in do well. But the point of investing is to make possible the life outcomes that are unique to your personal goals, like buying a home or having enough for your retirement. Keep your investment goals in mind, rather than focusing on the day-to-day performance of your portfolio. 


Seize investment opportunities

If you’ve decided to start your investment journey early, remember to speak to a financial adviser, focus on balancing risk and potential returns, seek mentorship from experienced professionals, and understand the destination that you’d like your investment journey to lead to.  

If you’re embarking on your journey as a young investor, Nedbank Private Wealth gives you access to a world-class platform, research, and learning material. If you’re not a client yet and want to find out more about how Nedbank can help you, contact 0860 111 263 or complete our online contact form.

Consider our Young Investor product, which offers access to SA’s top stock picks and online share trading. If you’re between 18 and 25, you can invest with no minimum charge and a low broker fee.