5 things to know before investing as a teenager
Things to know before jumping in Investing arena
Are you a Teenager? Are you someone who is left with some extra money every month? Are you someone who wants to invest the above-mentioned money?
Then next few words of wisdom are definitely for you!
For many people, the word “Investing” conjures up images of men in suits, monitoring the exchange of millions of dollars on a Stock Ticker. Well, let me tell you- You don’t need to be the Wolf of Wall Street to start investing! It’s okay if you’re more of a mouse of Main Street.
Investing is a way to set aside money while you are busy with life and have that money work for you so that you can fully reap the rewards of your labour in the future. Investing is a means to a happier ending.
Legendary investor Warren Buffett defines investing as "The process of laying out money now to receive more money in the future."
If you invest in a bank fixed deposit (FD), you get returns ranging from 5% to 7% maximum. However, If you invest in a good company, then the stock market gives you a return of 15% to 30%. And this percentage is the difference between a comfortable life and a life where you struggle to make ends meet.
Well, this is about Investing but the question still remains that why should you start investing when you are just a teen. To start with, money grows exponentially with the passage of time and it shall get more time to grow if you start early in your life.
Compounding is termed as "8th Wonder" of the world after Taj Mahal. Warren Buffet, Harshad Mehta, Rakesh Jhunjhunwala and many more came from a very middle-class humble background and look what Compounding has made them today.
Even if you plant a seed today, it shall not start reaping fruits from very next day. It shall take years to grow up into a giant tree and offer you its delicious fruits. Same is the case with Stock Markets. If you give your invested money some time to grow, it can turn your life upside - down.
I know you would have become totally excited and greedy to catch the next train to Bombay Stock Exchange (if you are still reading this) but there are few pieces of advice that I would like to share with you.
Here are certain points that you should get fixed in your Cerebrum, Cerebellum, Medulla & Oblongata before jumping into Investing Arena ~
1. Try to avoid Debt at all costs ~
If you want to become wealthy, debt is the biggest obstacle in your path. You can't even imagine how much money we spend all through our lives in paying loan interests.
Never ever take a loan unless it is an educational loan that too from a prestigious college. If you can manage to continue your life without having a debt, slowly & gradually you'll get to see few bucks remaining to be invested, after your monthly expenses.
Having a debt definitely takes away a big crunch of your savings that can be smartly invested.
2. Build a Savings Habit ~
This is one of the hardest things for grown “Adults” to do. Trust me, that little voice in your head that wants to be a spoiled brat NEVER goes away.
This is the age where you don't have any responsibilities to fulfill, at the same time this doesn't mean you don't need to Save.
3. Study Stocks, Bonds, Investing ~
You’re here on cofounderstown.com and that’s a good start for now. Commit to finding more education about money and investing. A thirst for knowledge is critical if you want success!
Start watching morning analysis of stock markets on Zee Business and CNBC (Television Channels). Try to learn a few financial market terms everyday from their conversations.
4. Create a Second Income ~
Entrepreneurship is probably your best chance at financial freedom. Even if you are on a Job, try earning some passive income. Create a “Side Hustle” for yourself as soon as possible. Learn what it takes to attract attention, leads and customers.
Figure out how you can make money out of thin air by providing value to others. Now whatever side income you get to earn from your side hustle, start investing in few easy chunks, let's say, Mutual Funds.
5. Be patient, Young Grasshopper ~
Enjoy life, Be Adventurous, Take risks, Be Young, Careless and Free, Explore.
It takes years to build an empire. Similarly works the Investing Game. Big Bull of Indian Stock Market, Mr Rakesh Jhunjhunwala once shared in an interview, how he became a millionaire by investing in share markets.
20 years ago he purchased stocks of 15 companies out of which, today 13 companies have already shut down and holding stocks of remaining 2 companies for 20 years made him what he is today.
A key point to learn here is you have to be patient. The patience of about a few years or decades can totally transform your life.
Well, the Stock Market is a device to transfer money from the Impatient to the Patient. Now, which side would you like to hop on? Being Patient or Being Impatient?
Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that!