The younger you are when you start investing, the longer you have to invest and ride out the volatility in the market.
This means you have an opportunity to significantly grow your money and beat inflation, says Sebastian Pillay, head of Share Investing at FNB Wealth and Investments.
Pillay says time in the market as well as a well-diversified portfolio are the most valuable elements of any investment plan.
“The majority of investors say their secret to success is a long-term approach with quantifiable goals, which is why starting your investment journey early in life can be one of the wisest moves you can make,” Pillay says.
Nicole Smit, product manager at FNB Money Management, says: “Before you start your share investment journey, you first need to ensure that your finances are in a good position to support your financial goals.”
According to Smit, getting debts under control or paid off and having a healthy savings balance in place to cover emergencies will give people a good head start on their financial journey.
Pillay offers advice to help aspiring young investors:
Have many eggs, in many baskets
Diversification is one of the most valuable keys to investment success.
Pillay recommends that young investors take a balanced approach to building their share portfolio by including a variety of asset types (shares, bonds, property, etc.) as well as investing in shares with different geographical and currency exposure.
“Full diversification can take time to achieve, but if you are able to build up a well-diversified portfolio over time, you will protect your overall investment value from large volatility swings, which can take time to recover".
ETFs (exchanged-traded funds) are a great investment vehicle for young investors and people should consider making this the core of their portfolio because ETFs offer diversification.
Playing the long game
Time in the market or a long investment horizon is valuable to the investment process. Patience, consistency and self-education are important for investing and achieving long-term goals. The best way of doing that is by having a clear investment objective.
“The most successful investors know what they are investing for, and unless that long-term objective changes, don’t fiddle too much with your investment portfolio – even when the market heads south for a time,” Pillay said.
Invest with your head, and your heart
Investment decisions should be based on thorough research and a good understanding of the shares and the companies you invest in.
Just because an investor watches a particular streaming channel, that doesn’t mean that the company is the best investment. However, it is also important to invest in ‘stories’ you believe in.
Pillay says if you have a passion for ESG (environment and social and governance) value factors, an investment in a company that takes these ethical considerations into account can contribute to making a meaningful difference with your investment decisions.
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