How to Invest for Young People in 5 Easy Steps

Ngopisantuy.comHow to Invest for Young People in 5 Easy Steps, Having a personal investment in the financial market has now become a profitable way of life for young people or first-time job seekers.

The conventional belief that only persons of mature age should invest is no longer valid. This is evidenced by the demographic statistics of Indonesian investors, which is increasingly dominated by the millennial young age group.

According to statistics from the Indonesian Central Securities Depository (KSEI), the number of investors or Single Investor Identification (SID) in the domestic capital market reached 3.87 million by the end of 2020. When compared to the end of 2019, this statistic climbed by 56%.

Almost half of all investors were under 30 years old, with the age bracket of 31-40 years accounting for 25% of all domestic investors in 2020. In other words, 70% of Indonesia’s market investors are young individuals.

If we are all in agreement that we want to begin investing in the capital market, consider following the rules for investing in the following financial markets:

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How to Invest for Young People in 5 Easy Steps

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How to Invest for Young People in 5 Easy Steps

1. Recognize Investment Concepts and Risks

Insurance is the most fundamental financial risk management technique. Anything that might jeopardize a person’s financial situation should be covered.

Although not everything can be covered, at least two forms of insurance are critical to have: life insurance and health insurance.

These two sorts of protection are frequently overlooked by young people because they believe the danger of being ill and dying is not too great. Mental health and protection are sometimes regarded as the demands of senior age groups who are already married. Of course, this assumption is false, because no one can anticipate the likelihood of being ill or dying.

So, when it comes to which insurance is more vital, the answer is that both purchasing life insurance and purchasing health insurance are equally important.

However, if you are still in a position where you must prioritize spending premiums, you might explore the following possibilities.

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2. Set specific financial objectives

If you want to start investing, the next step is to make a list of the financial goals you wish to attain through investment. Financial objectives are simply defined as a condition to be met in relation to certain financial fund aims for a given time period. Because financial objectives have specific aims and methods, the way you invest may be more targeted.

You may also separate your financial goals based on the time frame. To begin, short-term financial objectives are those that you aim to attain in less than three years.

Homecoming and year-end vacation money, for example, first-home down payment funds, and so on. Second, set medium-term financial objectives, such as the amount of money you want to save over the next three to five years.

For example, three-year marriage funds, postgraduate school funds, and so on. Third, set long-term financial goals, such as raising cash in less than five years. This comprises pension funds, university children’s education funds, and so forth.

3. Select an Investment Instrument

You may begin identifying the best investment instrument based on the time horizon of your financial objectives and risk profile after you have financial goals that have been categorised based on the timeframe of attainment.

The time horizon is critical because it influences the risk assessment of an investment instrument as well as its efficacy in assisting you in reaching the set fund aim.

For example, if your financial aim is to put up a marriage fund of IDR 100 million in three years, the best investment option is a low-to-medium risk instrument, such as money market mutual funds or fixed income mutual funds. Stocks are not suggested for 3-year financial planning because the danger of price swings in the near term is too great.’

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4. Establish an Investment Account

It’s time to put the strategy into action after you’ve established your financial goals and selected your investment instruments. To invest in the stock market, you must first open an investing account. It is not difficult to start an investing account.

You may accomplish this by contacting the appropriate financial institution, such as a securities firm if you want to invest in stocks, or an investment management firm if you want to start investing in mutual funds online, and so on.

A personal identity card, a Taxpayer Identification Number (NPWP), a bank account number, filling out an initial investment form, and other conditions that you may check with the appropriate financial institution are usually required to start an investment account.

Starting to invest is now simpler because to the advent of financial technology (fintech) businesses that allow you to start from a device without having to go to an office or other physical location.

5. Implement Investment Discipline

When it comes to investing, you must have the appropriate plan. Strategy assists you in optimizing your capital in order to meet investment targets based on financial goals.

For example, if you don’t have a certain time to follow daily stock market moves, you may use the dollar cost averaging (DCA) method or monthly investments.

There is also a value investing approach in stock investing, as well as other techniques that may be chosen based on your preferences and financial objectives.

Remember to assess your investment performance at least once a semester. You can examine the performance of investment returns reports that are delivered on a regular basis by securities or related investment managers.

Author: Irawan
I'm a regular contributor to IRAWAN commander, and in my business blog, my team and I share tales on the experience of starting a business from zero, how it feels to build a startup, and how to scale-up.

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