This blog post was inspired by a podcast interview I hosted on The Financial Wealth and Health Podcast where I interview Rob Clausen, my father, business partner, and founder of Desert Wealth Management. Click here to listen to the podcast episode if you want to check it out!
So what are the four important investment tips that I want to share for young people in today's blog post?
#1: Invest when you're young before you have more responsibilities to pay for.
When you start paying for a mortgage and start having children, it can be more difficult to find extra money to save each month. This is why when you're younger, and before you are more tied up in financial responsibilities, it could be helpful to start investing. Of course, you should have adequate emergency savings and pay off certain debts before you start investing. But if you're at this point and want to invest before a mortgage and the kids come, it can be a great idea.
#2: Starting small builds lasting habits.
A lot of times, young people think that it's not worth it to invest in small amounts. But even investing just $25, $50, or $100 a month can start the habit of paying yourself first and setting money aside for larger goals. Even if you can only set aside small dollar amounts each month, the habit of doing so can help you so much down the road because, as you make more money, you will most likely be in the habit of saving more money as you grow older.
#3: Dollar cost averaging can be effective, even in volatile times.
The idea of dollar cost averaging is essentially investing the same dollar amount each period in the same investment at different share prices. For example, this could be investing $100 a month into the same mutual fund or same portfolio of ETFs. When you use dollar cost averaging, you're buying shares at different prices, lower and higher.
According to an Investopedia article:
“The goal of dollar-cost averaging is to reduce the overall impact of volatility on the price of the target asset; as the price will likely vary each time one of the periodic investments is made, the investment is not as highly subject to volatility.”
#4: Understand the goal and time horizon for your investment account.
It can be tempting to start investing in the market to see what happens. But if you want a more strategic method to investing, define a goal and a time horizon. For example, if you're saving for five years for a down payment on a home, that investment account will look a lot different than if you're saving for 40 years for retirement. The investment portfolios, composition, and level of risk will change depending on the goal and time horizon for the account. It's important to define this before you start investing.
Thank you all for checking out this blog post about these four important investing tips. And if you want to learn more about investment tips for young people, please check out that podcast interview I did with
Click here to listen!
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Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.
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LPL Financial and Desert Wealth Management do not provide tax or legal advice. Clients should consult with their personal tax and/or legal advisors regarding their circumstances.