YOUNG STUDENTS ENCOURAGED TO INVEST
July 30 - Aug 05, 2007
Investing is usually stereotyped as the domain of the older and more financially stable generation. Investing at an early age is mostly unheard of, especially in Pakistan. Although, according to many experts young age is the ideal time to start investing, due to compounding- the "eighth wonder of the world". If a 20-year-old puts Rs.1,000 into a mutual fund that returns on average 12 percent a year, by the time he turns 50, that money will have grown to Rs.35,949. But if he waits until the age of 30 to begin, the return will amount to Rs.10,892. For young investors, time is on their side.
Young people usually look upon investment as being too difficult; or that they do not have enough money. Due to the advent of online investing, it is not only easier to invest, but is much cheaper. It is not necessary to hire a stockbroker and pay him hefty commission for his time, with online stock brokerages and other financial services companies you can do it yourself. Some have low or no minimum balance requirements, opening up doors for first time investors. Set-backs are to be expected from time to time, but short term swings become less significant if a long term outlook is maintained.
Chris Stallman was 14 years old when he collected his college savings, gift money, and other savings-totaling about $3000, and placed it into a Roth IRA (Individual retirement account) and a mutual fund. His aim was to graduate from college with a minimal amount of debt as the average college student in the US has a debt of around $20,000 upon graduation. The self taught investor quickly turned this into a life style; at 15 he started TeenAnalyst.com with a friend. It is a resource for young investors which Stallman still runs today at the age of 22. The site has received praise from The Wall Street Journal and The New York Times. He is currently a senior in the University of Michigan and has been able to pay for more than three years worth of his undergraduate education. "I think it's pretty easy to stereotype students as impatient investors who are just going to "gamble" their money away. But young investors today have far more resources available to them. There are websites, magazines, mutual funds, books, etc. geared specifically towards them," Stallman says in an interview with Young Money magazine.
Not all young investors have to be finance gurus or experts in money management. Carrie Porter is a student of journalism in college and founded an "investment club" in high school. The club was open to all her high school students and gave her and other members a way to learn more about investing, by being able to visit companies that are prospective investments to pooling together financial resources and forming a larger portfolio. Starting off with companies that everyone knew of enabled them to learn that starting investing was not all that difficult or intimidating. Carrie advises to start investing early as you will learn valuable skills that you can use when you start a career and have more money to invest, and to not be indecisive or greedy when you make a mistake.
If a few fundamental basics are kept in mind, it is possible for anyone to achieve success in investing. It is integral to learn how investing works before starting, a lot of people make the mistake of deciding to learn through experience. Losing interest in investing, not knowing your risk tolerance, being too greedy or impatient are just some of the mistakes that people make. Investing is after all not gambling and should not be treated as such. "Investing for the short-term or daytrading can be considered gambling because it's virtually impossible to see the very near-term future of a stock, but if you educate yourself and then take a long-term perspective, there is an excellent chance that you will earn a great return on your investment," says Chris Stallman.