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Guidance for Young Investors

Updated on March 25, 2020
Ethan Kilpatrick profile image

I have a good amount of experience investing my money since I began when I turned 18 years old. I am still learning though, but who isn't?

Why Now?

You may hear your parents or mentors say "There's never a better time to save than now?", well they're mostly right. I'd say there's never a better time to invest than now. The sooner we invest our money, the more money our money will make for us. When I first started looking into the many different financial options I was overwhelmed and I didn't know where to look for guidance. I'm definitely no expert on the subject, but I like to think I'm ahead of the curve in terms of what I've done so far.

The First Step

Now, for some actual clarity on this whale of a subject. The first step to investing your money wisely is to READ, READ, and READ some more!!! Lots of people, including myself, will start investing by just jumping in head first, which may work sometimes but definitely isn't the best long-term option. I suggest reading online about the many different things there are to invest in, such as the traditional things like Certificates of Deposit and Stocks, but there are other unconventional methods of 'investing' that you may not think about immediately. One newer commodity that has gained popularity in the past few years is cryptocurrency. Lastly, something you can invest your money in is yourself. If you have an idea for an invention or a business, there are many ways to earn money to help fund this, such as Kickstarter. The methods of investing that I've just mentioned will be detailed lower in the article

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Using the Bank

The easiest way to have your money make money is to put it into a bank account, whether that's a traditional savings account or a Certificate of Deposit. One upside to putting your money in a bank is that it is FDIC insured up to $100,000, so it is relatively impossible to have your money stolen. Also, this is safe because the interest rates stay constant for the most part and are a lot less volatile than other methods of investing, such as the stock market.

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The Stock Market

The stock market is probably what you hear the most about when it comes to investing money and making big bucks. But let me tell you right now, high rewards come with high risk. In the stock market, there are many things you can do, like purchasing shares of companies, placing call/put options on stocks, buying pennystocks, and much else. If you are looking to invest for the longterm, buying shares of larger, trustworthy companies is the way you want to go. If you hold these shares through all the ups and downs for a good while, you are almost guaranteed to make a nice return. Placing call or put options on stocks is basically just you gambling on whether a stock is going to increase or decrease in price over a given period of time. This may sound identical to just buying the shares in the first place, but these options don't require you to actually have the money to buy the shares, you can just make money based on the increase or decrease in the stock. And lastly, pennystocks are a very risky option, but could yield a very nice profit. These kinds of stocks are probably what you're thinking about when you think of the stock market, the Wolf of Wall Street, it's called day trading and it's very dangerous. Basically, you're making mass purchases of lots of different really cheap stocks and selling them when they're up and buying more when they're down, throughout the day, until the market closes.

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Cryptocurrency

This investment option has been very lucrative over the last few years, especially for those who hopped on the Bitcoin train soon after its inception. For those of you who don't know what cryptocurrency is, it's a digital currency that is usually decentralized, meaning it is not controlled by any government, but rather guaranteed trustworthiness by the computers in its system. Cryptocurrency was not meant to be treated as a commodity, but with its high volatility, companies haven't been able to accept it as a form of currency, so it proves to be the perfect investment, at least in my eyes. My favorite cryptocurrencies are Bitcoin and Ethereum but there are some very interesting up and coming projects that are worth reading up on and perhaps investing in.

The Implementation

Now you're probably thinking to yourself, "well, now I know all this information, but how do I actually do it." Well, it's a good thing you asked. I had the exact same issues over the last few years. Getting involved takes lots of initiative and research, but it's definitely worth it.

How can I put money into a bank?

You will want to be sure that you know the interest rates at multiple different banks and pick the highest one, but you also want to know whether their rates for that CD or account could change after you create the account. Some banks I would suggest are Hancock, Bank of America, Wells Fargo, Chase Bank, and the list goes on. Probably choose a bank that is nearby though.

How can you get involved in the stock market?

I prefer to invest using online services such as Fidelity, TD Ameritrade, E-Trade, or Charles Schwabb. Typically the way to choose between these services is to pick the one with the lowest fees charged for each stock purchase. There are also smaller services that are specifically geared towards younger people with less money such as Acorns and Robinhood. Personally, I use Robinhood the most because I really like its mobile interface and they don't charge any fees to purchase stocks or options.

How can I get cryptocurrency?

There are many different platforms from which you can purchase cryptocurrency, but they differ extremely in the different benefits they offer and their privacy features. The easiest platform for a beginner is Coinbase. The account setup is rather easy, but they require enough private information that your account is secure. Also, coinbase includes a wallet so you don't have to have a separate wallet to store your cryptocurrency, although I do recommend this. The main drawback to Coinbase, in my eyes, is it's very limited in the different cryptocurrencies that you can purchase. It includes almost exclusively the larger coins. A platform for a more advanced user would be Binance. I really prefer Binance because of the sheer amount of information and graphical analysis they offer on their website. Binance doesn't have a mobile app, which is a drawback for younger users, but if you're looking to put money into more obscure coins, Binance is definitely the best way to go.

The Greatest Option: YOU

This method of investing may not seem like 'investing' at all, but mark my words, this is perhaps the most important technique you can use. A return on your money doesn't have to mean more money, you can be bettering yourself. You can use your money to purchase software to learn how to code and create apps or websites. You can use your money to start your own business, which may be as simple as odd jobs around the community. The overall picture is that you can spend your money bettering yourself and look at that as an investment, and a very important one at that.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2020 Ethan Kilpatrick

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