How to Start Investing as a Youth in 5 Easy Steps

Want to Try Investing? Read the Following Tips First

      Having a personal investment in the financial market has now become a lifestyle for young people or first jobbers. The old view that investments can only be made by a mature age is no longer relevant. This can be seen from the demographic data of investors in the world, which is increasingly dominated by millennials.

If you have decided that you want to start investing in the capital market, follow these guidelines for how to invest in the financial markets:

Have Clear Financial Goals

The first thing to do if you want to start investing is to record the financial goals that you want to achieve through investment.

Financial goals are simply interpreted as a condition that you want to realize in relation to a certain financial fund target for a certain period. By having financial goals, the way you invest can be more focused because you have clear targets and strategies. (bankrate.com)

You can also divide your financial goals by target time.

Short-term financial goals

This is a financial goal that you want to achieve in less than 3 years. For example: year-end vacation funds, first home down payment funds, and so on.

Mid-term financial goals

This is a financial goal that you want to collect in a 3-5 year span. For example, funds for marrying in 3 years, postgraduate school funds, and others.

Long-term financial goals

This is a financial target to be achieved in a time span of over 5 years. Included here are pension funds, children's education funds at universities, etc

Understand the Meaning of Investment and its Risks

Investment is an activity to manage finances to multiply money and increase wealth.

Currently, there are various types of investment, including: stock investment, property investment, gold investment, bonds, time deposits, etc

Whatever form of investment you choose, you need to know that investing has its own benefits and risks. Investment risk can occur in any investment with different degrees.

Determine the Investment Instrument

After having financial goals that have been categorized based on the timeframe of achievement, then you can start determining the choice of the right investment instrument according to the time horizon of your financial objectives and risk profile.

The time horizon is very important, because it will affect the assessment of the risk of an investment instrument and its effectiveness in helping you achieve the specified fund target. For example, if your financial goal is to set up a $10,000 marriage fund in 3 years, then the right investment choices are low-to-medium risk instruments such as money market funds and fixed income funds.

Stocks are not recommended for 3-year financial purposes, as the risk of price fluctuations is too high in the short term.

You also have to pay attention to your risk profile as an investor. There are three categories of risk profile investors: aggressive, moderate and conservative.

The characteristics of conservative investors are that they like stable investments, their initial capital does not want to decrease, and they do not like fluctuations in investment value.

Moderate investors are investors who can still accept price fluctuations, hope that their initial capital will not run out at all, and are quite satisfied if their investments grow beyond inflation rates and bank deposits.

Aggressive investors are investors who are ready to take the risk of losing their investment capital, comfortable with sharp price fluctuations, because they want their investment to grow many times above the deposit interest (risk free rate).

Open an Investment Account

After you are familiar with the risk profile and investment instruments, it is time to execute the plan.

In order to invest in the capital market, you must have an investment account. It's easy to open an investment account. You can do this through the right financial institution, such as in a securities company, if you want to invest in stocks, or at an investment manager, if you want to start investing in mutual funds online, etc.

Starting an investment is now easier with the existence of a financial technology (fintech) company that allows you to start just from a gadget without having to go to the physical office of the company concerned.

Discipline in Invest

In investing, you need to have a proper strategy. The strategy helps you optimize the capital you have in order to achieve your investment targets in accordance with your financial goals. For example, for stock investment, you choose the dollar cost averaging (DCA) strategy or regular investment every month, because you do not have a specific time to monitor the daily stock market movements.

There are also value investing strategies in stock investing, and other strategies that you can choose according to your convenience and financial goals.

Evaluate the performance of your investment regularly, at least every semester. You can check your performance through investment return reports that are sent periodically by securities companies or investment managers.

Before starting to invest, it would be better if you have financial readiness. Indicators of financial readiness include: surplus financial cash flow conditions, controlled debt installment expenditures not exceeding 30% of the value of regular monthly income, and have an emergency fund of at least 30% (ideal target value for emergency funds).