Best Ways to Invest Young Money in 2023 • Benzinga

Ask two people why they invest and you’ll probably get two different answers, but everyone’s reasons stem from an idea; end up with more than you started. This usually happens over a period of time. Below are common reasons why people invest young money.

Reasons to invest

• Refuge: Contributes to your ability to retire and earn a profit later in life.
• Life events: Collect enough money to pay for a wedding or start a family.
• Personal development: Saving for college and graduate school.
• Accommodation: Bank enough money for a down payment.
• Create Wealth: Earn money to increase your wealth.
• Care for others: Invest to generate funds for charity.
• Prevent inflation: Use low-interest savings accounts to offset inflation.

Make a schedule

People often gift government bonds to newborns for college. Such a careful investment ensures that the money and profits are there when they are needed, but this strategy may not be suitable for someone trying to earn enough to quit their job.

Your reason for investing sets the framework for an investment plan, taking into account the following:

Goals

• Goals should be as specific as possible.
• They answer How much and when.

Risk profile

• An individual’s personality and goals determine the level of risk to be accepted.
• With a longer time horizon, you can now take on more risk that spreads over time.
• Create a portfolio focused on lower volatility if the thought of waking up one morning to a 5% portfolio drop makes you uncomfortable,

Income versus expenses

• Financial plans look at inputs (income) and outputs (costs).
• Expenses include common items such as food, housing, and loan repayments
• Whatever is left over after you have paid all your expenses can be used for investing.

Types of investments

After creating an investment plan, select your options. Investments fall on a scale that balances risk and return. Riskier stocks should yield bigger gains than safer stocks. Stocks should offer better returns than bonds. The type of investment you choose balances these forces.

Shares

• Partial ownership of a company.
• You share the profits and losses along the way.
• Different stocks have different levels of risk.
• When companies go bankrupt, shareholders usually get nothing.
• Shares can be bought and sold easily.

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Government and corporate bonds

• Payment guarantee from a company or a government.
• Failure to pay a security deposit will result in non-payment.
• Bondholders can force the issuer to sell assets to repay their investment.

Property

• Ownership of residential or commercial land or buildingslincluding main residences.
• Very illiquid market that can take weeks to months to buy or sell.
• Risk varies by location and market cycle.

Peer-to-peer lending

• Personal or business loans
• May not have the same rights to force the sale of assets as bondholders
• Used by individuals to start businesses or reduce high interest payments
• Risk and return are assessed per trade.

Savings accounts and certificates of deposit (CD)

• Money given to banks or financial institutions offers a low but guaranteed interest rate.
• Conservative investment that people use for emergency funds
• Easily accessible and very fluid
• CDs may carry a penalty for closing them early.
• Both may require a minimum balance.

Education and personal development

• Use your savings to pay for your education and training.
• You take classes and develop skills in the hope that this will lead to better jobs in the future.

Choose a preferred platform

There are several digital finance platforms you can try, stock brokers to review, banks and much more. If you are just starting out, you can try a platform like MoneyLion whenever you want to build your credit, invest, manage your money and learn more about your finances.

Learn more about stocks. Discover Benzinga’s article Buying stocks for beginners.

Final Thoughts on Investing in Youth

Reducing your expenses is one of the best ways to invest. People often forget to see their lifestyle as an opportunity to make money. Spending $300 to insulate your home can help you outperform the stock market. Paying off your credit card that charges 20% interest will give you better returns than most stocks.