Does the idea of ‘adulting’ make you cringe? That’s because no one talks about the upside—making lots of money!
You won’t get there by working just a 9-5 job. You have to harness the power of the stock market.
You just need the tools to succeed. Start now with this young investor’s guide on how to start a portfolio.
What’s An Investment Portfolio?
You may be asking yourself what an investment portfolio even is. Nope, it’s not like a design portfolio or a resume. An investment portfolio represents all your current investments.
Now, you may be wondering what you can invest in. Investments include common stocks, preferred stocks, bonds, and real estate.
A common stock lets you own a share of a company, but a preferred stock gives you an even larger (and sweeter) piece of that pie. Bonds are a loan you invest in, for which you’re paid back. Real estate investments are tangible investments in property, like commercial buildings for example.
Once you get the hang of stocks, try your luck at day trading. This is the practice of buying and selling stocks in one day. You’ll need lots of tools by your side, like a trader workstation, stock scanning software, charts, financial data, and a zerodha margin calculator.
While there are only four main types of investments, there are several investment structures to consider. These include:
- Exchange Traded Funds (ETFs)
- Mutual Funds
- Hedge Funds
- Index Funds
- Real Estate Investment Trusts (REITs)
- Trust Funds
- Limited Partnerships
Another frequently used term is “diversify your portfolio.” This means to invest in multiple stocks, rather than putting all your money into just one.
Let’s explore some of the best stocks for young investors like you. But first, let’s see what Grandpa Warren has to say!
Warren Buffett Knows Best
Jumping into the stock market can be a little overwhelming. Luckily, no matter your age or experience, you can always turn to Warren Buffett for sound investment advice.
In a 2017 interview with CNBC, Buffett told millennials not to focus on “making money”, but rather, follow a path that builds character. Not only does this benefit you, but the world around you. You want to strike a balance between the ambition to make money and a passion to serve others.
On the surface, Buffett’s words may not seem like investment advice at all, but it is. In addition to keeping a portfolio, Buffett also keeps an ‘inner scorecard’ to reflect on how he treats others. He counts his honest approach to business as a major factor in his success.
This is great advice for young investors who are particularly passionate about human rights, social justice, and environmental issues.
What Are The Best Investments For Young People?
There are many ways to diversify your portfolio. Let’s start with stocks trending right now with young investors like yourself.
Retirement is on the minds of many young investors. That’s one reason why real estate is such a popular first-time investment. Real estate is a type of equity, so it keeps growing despite economic inflation.
Not to mention, fast-growing locations can dramatically increase your appreciation value! Orlando, Jacksonville, Raleigh, Nashville, and Atlanta are five of the best cities to invest in right now, according to Forbes.
How to Start A Portfolio For Real Estate Investing
There are a few ways to invest in real estate. For starters, if you’re the hands-on type, consider investing in a rental property first and work as a landlord. This is a great way to learn the ropes.
You can always hire a property manager too, which is better for multiple real estate investments.
Another option is investing in a real estate group. This works more like a managed mutual fund which pools money from multiple shareholders. These companies build and maintain residential properties to invest in.
If you want a healthy dividend distribution, there are Real Estate Investment Trusts or REITs. Companies use the money invested in REITs to buy real estate investment properties.
Unlike common stocks, REITs aren’t subject to corporate income tax. Thus, REITs produce more consistent dividend distributions.
Fans of the hit show, ‘Flip or Flop”, will love this one. Yes, the last real estate investment option is house flipping! House flipping may be winning hearts and mines, but it’s one of the riskier real estate investments out there.
Also known as real estate trading, house flippers buy properties with the intention of selling or flipping them for profit. House flippers also prefer buying undervalued properties in hot markets since they have a greater chance of selling them in ‘as is’ condition.
Short-Term Investments for Young Adults
Long-term isn’t the only investing strategy. Short-term investing is a great way to build financial security right away.
First and foremost, open a savings account. A little from each paycheck can go along way and it grows interest. Your bank can even automatically deduct it from your deposit so you don’t skip a beat.
A money market account is an alternative to a savings account. You can open money market accounts with Sallie Mae, State Farm, Capital One, TiAA, and many more financial institutions. While these can produce more interest, they’re not FDIC insured like savings accounts and CDs.
A Certificate of Deposit, or CD, is a short-term investment that requires you to pay in for a window of time. It could be as little as 90 days to as much as five years, depending on the CD you choose. In exchange, you’ll receive a higher interest payout over time!
Last but not least are short-term bonds. These are different than stocks. Bonds are issued by entities that want to raise money.
Governments use bonds to fund projects. In exchange, you receive bi-annual interest payments over time, along with a final payout by a set date.
Since the promise to repay is backed by the US government, young investors enjoy less financial risk with this option. Corporate bonds are also available but come with much higher risk.
Invest In Your Future Now
You got this. You know how to start a portfolio to secure your future. But don’t wait to invest.
Use this article to plan your investment portfolio and to make choices that benefit your short and long-term goals.
Keep learning and growing with the latest tips for improving your income and quality of life!