What is the best time for someone to start investing?
I'm currently in high school and learning about personal finance. I plan on getting a part-time job soon to save up money for future investments. I want to start investing; should I make the decision of when to start based on my age, my knowledge of investing, or a combination of both?
Congratulations for already thinking about your future at such an early age! Following through on your plans will set you up for a great financial future.
Fortunately, it doesn't require earning an MBA to learn how to invest! Too often we overcomplicate the process or worry that some better option exists. Fear and greed are powerful emotions are best left out of the investing process.
Since you're new to investing, I'd recommend focusing on building a diversified, low-cost mutual fund (or ETF) portfolio. Picking stocks is incredibly difficult to do consistently. Index funds outperform the vast majority of professional, active managers. Any hope that you or I could do better is probably unrealistic.
Instead of having a complicated investment strategy, follow a few simple investing fundamentals like:
- Get yourself ready to invest by first building an emergency fund.
- Stay tax efficient. Since you'll be working, invest using a Roth IRA.
- Understand your personal risk tolerance. Your age will allow you to take a lot of risk. But don't take more than you can handle in a down market!
- Keep costs low. The lower the fees, the more of your portfolio you get to keep, especially over the many decades you'll be investing.
- Re-balance periodically. Once a year is fine.
- Stay the course! Don't bail out of the market when prices drop!
History shows us that regular investments, diversified across the equity markets and re-balanced periodically outperform other more "professional" investing strategies.
Get started as soon as you get your first paycheck! And good luck!
Knowledge is certainly important, and you should read and learn as much as possible and speak to people who could educate and guide you. However, if you keep your investing plan simple, the earlier you start and the more disciplined you are in creating and sticking to an investment plan the more likely you are to succeed in your objectives. Here is an article on the importance of starting early to allow the time value of money/compounding work in your favor. https://investopedia.com/advisor-network/articles/how-make-time-value-money-work-you/ Site Edit has several other articles that may help you as well.
You are way ahead of your peers in thinking about these things and asking questions like this- keep it up! All the best.
The right answer is immediately, even if it's a little to start. Inflation is constantly eating away at cash value. Starting young, you can leverage compounding returns over time. A great way to start is with an ETF portfolio that allows no minimum contributions.
The earlier the better. Start by accumulating shares of an stock market index fund and keep buying! Most of the major custodians (companies like Schwab, Fidelity, TD Ameritrade,...) have a free ETF purchasing program where you don't pay commissions on purchasing a qualifying fund. Those are a great way to get started.
Investors' success come from having a plan, sticking with it and time. Being in high school, you definitely have the 3rd key, just make sure that you read about how to create your own personal plan, and you will be successful.
I hope this helps.
Contrary to some of the other answers, I would say you should not start investing until you have reached a certain level of knowledge. Starting early is not necessarily the most important thing. You could quickly lose your investment if you jump in too early without knowing what you are doing and make some mistakes.
Also contrary to another answer, you should open a brokerage account, not a Roth IRA. If you open a Roth IRA, you cannot use the money until you are age 59.5 without a penalty. I am assuming you will want to spend some of your earnings on college tuition, a car, or some other goals that you have between now and age 59.5. You can open a brokerage account if you are age 18 or more. If you are not yet age 18, you can save your money until then and continue learning about investing.
One of the main decisions you need to make before investing is what strategy you are going to use. There are lots of articles on Site Edit about Strategic investing and Tactical investing. Also, read about and decide on index investing versus individual stocks, or a combination. Finally, I would recommend some reading about technical analysis and see if that interests you.
Best of luck.