What I wish I’d known about money before I turned 40

What I wish I’d known about money before I turned 40

So, what would you tell your younger self about money? Here, in the hopes that it might be helpful to you on your own journey, I decided to pick one thread and this is one related to investing.

Looking back on my past as a young investor I sometimes want to slap myself

Despite having worked in the financial market from a young age and having access to some of the best financial data, mentors, and local industry leaders. I didn’t really know what I was doing back then and I made some costly mistakes which I only realised over time.

I wish I could go back in time and offer my younger self some bits of sound advice.

Here’s a list of basic investing tips to the “younger me” that hopefully will spare you some of the same mistakes:

Understand the value of compound interest – start young!

Long-term Investment is one of the last things you’re going to think about when you’ve had hardly any time in the workplace or the opportunity to earn money.

“What? I’m only a teenager!” As outrageous as it sounds, investing money in your younger years is a fundamental part of having larger savings later in life and creating freedom of lifestyle. The earlier you start investing, the more time your money has to grow with interest earned. And with a long time, investment mindset, you don’t have to be overly concerned about the volatility of the market.

Don’t buy or spend on that thing – invest your money instead

It's insane when I think about all the useless stuff I bought when I was in my late teens and twenties. Spending gift and pocket money on brand name clothing, new music, movies, going out to concerts and nightclubs, buying expensive drinks and meals with friends.

Yes, I had loads of fun but I could have had as much fun living a bit more thriftily, taking the time to think about each expenditure carefully and about how much capital I could have in the longer term if I invested more in building value for my future self.

Familiarise yourself with different types of investments – there are a lot of options out there

If you have some money, it may be tempting as a young person to simply open a share trading account and begin buying and selling shares. But it’s important first to understand the basics of the financial markets and the advantages of diversifying in order to reduce the risk of losing all your capital when investing in one asset class. If you spread your capital across different types of investments namely, equities, fixed income, cash, properties, and commodities chances are you can manage risk better.

Reinvest your dividends – yes!

As a young investor, it’s tempting to use dividend payouts from investments to go and treat yourself to one or few self-indulging pleasures. But those dividends can easily be used to buy more investments. Imagine the growth in a portfolio that is not only seeing capital growth but an increase in the number of investments. There is amazing power in compound interest it is an investor's best friend.

Don’t panic- don’t check your investment performance every day

Investments go up. They go down. They go up again. Tracking them each day really serves no purpose, and will only stress you out. By checking your portfolio only once a month or so, you’ll be less tempted to buy or sell based on an emotional reaction to the market movements.

It’s very tempting to pull your money out of investments which lose value quickly based on market volatility. Now I look back on investments that I sold in a panic or because I wanted the cash to spend on a lavish holiday and really wish I had held onto them as they would mostly have recovered in value and made me money over the long-term.

Know what you’re investing in – educate yourself

There are so many investment options available today, so before you invest your money, do your due diligence properly and have a solid understanding of what you are investing in. Learn how to read a prospectus, earnings reports, research, and investment reports.

Keep up to date with market news, trends, and analysis. Watch out for red flags, know how volatile your investment is and never stop learning. Talk and learn from other investment professionals, they are more willing to teach and offer leadership and guidance than you think.

Learn about commissions, fees, and taxes

Investment companies try to be transparent about fees and costs, but it’s up to the investor to understand that it costs money to invest. Brokers and fund managers take a cut of every Dollar or Rand that you invest, and there is tax implication. Banks charge banking fees.

None of this should stop you from investing, but you must have a good grasp of how it impacts the performance of your investment portfolio and don’t be afraid to ask questions if you don’t understand, after all, it is your money and you need it to work for you.

In conclusion, due to the power of compounding returns, a small investment made early in life can lead to a larger account balance than a larger investment made later in life so it’s imperative to start young.

Start now because with each day you are closer to tomorrow than you are to yesterday.

Personally, I now find that I’m more attracted to investments and companies which support my advice above and who advocate education in responsible investing. So it’s no big surprise that I find myself working with the dynamic team at Wealth Migrate who offers this in alternative global real estate investing for all ages.

This article initially appeared on All 4 Women – June 15, 2017