Young adults are facing a whole new financial environment right now than we’ve seen in decades. Crisis-proofing your investments and low-risk opportunity is where young adults are focusing their attention on. If you’re hunting for high-risk bargain-bin investments, in today’s markets, that’s the first thing you want to avoid.
Here are the rules we recommend for young investors and some best investment opportunities for young adults:
1. Education Investments
Yes, that’s right. This isn’t just a list of investment strategies focused on the income you already have. Education in select sectors increases your income potential and is one of the smartest investments one can make in themselves.
Occupational pursuits – such as medical and legal – come with high income potential. There are others, of course. A post-secondary education provides opportunity to earn more and thereby increase your ability to invest.
2. Tax-Free Savings Account
One of the best investment opportunities for young adults is a tax-free savings account. A tax-free savings account allows for easy deposits and withdrawals, although there are annual limits to follow.
The advantage of a savings account of any kind is higher interest and low-risk. When you have extra funds hanging around or if you’re saving for months down the road, put that money into a TFSA which will allow interest to accumulate.
3. Index Funds for Novice Investors
The stock market is one of the best places to invest for young adults. That said, it’s a very complicated place to get to know. Few fully understand how to value stocks and investing mistakes are common. Index funds are pre-packaged bundles of stocks.
Index funds often represent and mimic the health of the economy. For beginner investors, you can start to build a portfolio through index funds. Index funds are a low-fee investment strategy and as close to risk-free as there is.
4. Investing in Technology Stocks
The tech sector offers the highest returns of any market in the world. On average, tech stocks provide up to a 34% return. Including companies from start-ups to billion-dollar brands, the unfortunate thing is that the buy-in is sometimes incredibly high or the risks are equally high. Technology changes quickly. Some tech companies succeed while others fall behind.
Do research. Look at emerging companies with the greatest long-term potential. Tech is full of opportunity waiting for a profit explosion. All you have to do, as an investor, is know where to invest.
5. Investing in Technology
Trends in tech investing include AI, smartphones and related software, blockchain and digital currencies, self-driving technology, computers and the software that run on them, Internet security, the Internet-of-Things and cloud technologies, streaming media players and related technology, wearable device companies like Fitbit and GoPro, and chips and processors and related hardware.
Dig into any of these subcategories of tech investing and you will find opportunity. Certain cities are vibrant with investment opportunities, such as the thriving Toronto tech market among many others.Once again, it comes down to doing your research and deciding where your investment’s best placed.
6. No Vanity Tech Stocks
As a young investor, you can take calculated risks. Do so intelligently. ‘Calculated risks’ is the keyword. Win or lose, you have time to rebuild your fortune if your portfolio is whittled down.
Additionally, avoid vanity stocks. Although tech names like Apple, Microsoft, IBM, Intel, Tesla, Netflix, and Amazon seem like reliable areas to invest, you aren’t going to net a big return on relatively safe, stable brands like this.
Look at the smaller companies doing business with these brands or businesses developing product that plugs into an underserved audience in these brands. Look for investments that can grow – not vanity brands.
7. Rent v. Buying A Home or Condo
The rent v. purchasing a home debate is one with many pros and cons on both sides. Home ownership in a location that’s growing is an investment that can pay off in a big way and it’s relatively safe.
Although the buy-in is significant, first-time property owners can make a decent amount of money in as little as five years if they’re smart about where they buy, when they buy, and are honest about the costs of home ownership.
8. Starting A Small Business to Serve A Community
Almost anyone can start a small business. For young people, the best chances at starting a successful small business is by serving a community that already exists. Look at issues in your community or at a national level that you can make a positive contribution to. Hunger, lack of resources, poverty, immigration, food waste, and similar unresolved issues exist in every community.
If you can start a profitable business around solving even a small element of a problem like this, you put yourself into the position to scale-up, re-invest, or develop a passive income stream.
9. Compound Interest Investment Opportunities
Compound interest is a powerful way to build wealth. It means to earn interest on interest previously accrued. Let’s say, you invest $5,000 every year beginning when you’re 20 and you cease this investment approach at age 30. Your upfront investment here is $50,000.
With compounding interest, this will grow and significantly so. For example, with a 7% rate of interest, your investment will reach $602,070 by the time you retire in your 60s. As a long-term strategy, compound interest works.