First, congratulations for becoming an interested investor. Time is an investor's greatest tool for success. If you recognize the fact you have many years to keep your money working for you, the magic of compounding will improve your returns.
Let me illustrate how. Let's say you and a 47-year old start investing at the same time. And let's say you both want to have $1 million by the time you turn 65 and you both get 10% annual returns.
To reach that goal, the 47-year old will need to save and invest nearly $22,000 a year, or $396,000 over 18 years. You, on the other hand, can have a cool $1 million waiting for you by investing just $1,000 a year, or $50,000 over 48 years.
So you can see, by starting young, you're already ahead of the game.
The secret is to avoid the temptation to do anything that could sabotage that advantage. You could wreck it by becoming too short-term focused. If you start trading in and out of stocks and mutual funds over and over during the year, you will chew up your advantage of time with trading costs, mistakes and poor decisions.
You can also ruin your advantage by chasing hot tips, trendy industries like ethanol or volatile industries like airlines. Hot tips too often turn cold, trendy industries can turn sour in an instant, as ethanol stocks did, and airlines have been such bad investments that legendary investor Warren Buffett avoids them.
Instead, my suggestion is to assess your taste for risk, design a portfolio that will generate the maximum return for that level of risk, save and invest as much as you can and put your money on auto pilot. In 47 years, when you look at your balance, you will be pleasantly surprised.
Now for the best part: any child/grandchild of a DDIG client is entitled to our full suite of services including education, investment management, investment planning, and more at NO CHARGE for the first $25,000 invested. We'll teach you how to save, how much to save and in which account you should save (i.e.: personal account, retirement account...) In addition, we'll help with important financial decisions such as buying vs. leasing a car, saving for the first home...etc.
Please note, an initial investment from a parent/grandparent's DDIG account disqualifies you from this program. Once your value is above $25,000, regular rates will apply.
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