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There is no escaping investing if you want to build wealth. But you need to stop having a myopic view about it. Investing is not only about money. It is about your desires, what drives you, your human capital and your relationship with debt.

Here are three things every young adult should know.

The coolest investment hack: Find the why

It’s a vicious cycle. You don’t invest because you have zero savings. You have no savings because you have zero motivation to save. You lack the motivation because there’s nothing driving you.

Investing is NOT an end in itself. You invest for a purpose. That purpose will drive you. So, ask yourself, what is it that I want my money to do for me? What is it that I really would love to have?

It could be anything. It could be an experience (a hot air balloon ride in the Sonoran Desert) or a lifestyle (a global cruise every three years). It may just be accumulating gadgets, building a fabulous house or just that you don’t want to retire poor. There is no right and wrong. There is no good and bad. There is no normal and absurd. Just be true and honest to yourself. Someone else’s pleasures may not bring you happiness. What fulfils them may not be your cup of tea.

Saving has such a negative connotation to it because it is associated with sacrifice. But what is the sacrifice for? Find that driver. Once you know what you want to spend your money on, then you can cut costs mercilessly on the things you don’t care about, and invest with a focus.

The discipline in spending, saving and investing—all will come only if you know why you are doing it. No investing cliché will do it for you.

The smartest investment: Being debt-free

It is so easy to live the high life on a line of credit. When your lifestyle is being funded by debt, you are swimming with the sharks.

There is nothing wrong with a credit card. The problem is with your inability to live within your means. Using a credit card is completely okay if you clear all outstanding dues by the end of the month.

There are three ways to comprehend how expensive debt can be.

First, there is a huge emotional cost to it. Imagine getting a salary cut or facing a job loss. That debt will hang on your head like a sword.

Second, recognize that the 18% or 24% or 30% you are paying in credit card debt is costing you a lot more than you could ever earn anywhere else.

Third, the more debt you have to service, the more your savings lag. This will have long-term repercussions because you need to start saving early to let compounding work in your favour. All the money going towards interest payments, if invested well, could add up to serious money over a young investor’s time horizon; wasting even a few of those early years can have a decent-sized opportunity cost.

If you are in debt, work on paying it off immediately. There is an immediate return there.

The investment that supersedes all: Invest in yourself

When we look at investing, we tend to only look at financial capital—the actual money you have to invest today.

What is almost always overlooked is human capital. Which is ironic because one of the best investments you will ever make is in your own human capital. Human capital is effectively your ability to earn money over time.

When it comes to investing our money, we want to put it to use to get a positive return over time. What about your skills? Abilities? Talents? These are the sources of your lifetime earnings power. Can you invest in these to reap returns over time? Where is your time and energy being spent? In what relationships are you investing?

You need to look at RoI (return on investment) from all facets. One of the best investments you will ever make is in your own human capital.

Explore all avenues. It does not necessarily mean enrolling for a business degree. You could pursue certifications. Develop new skills. Attend the right workshops. Look for a mentor. Read about the subject you want to increase knowledge in. There are plenty of podcasts available online. Just never stop learning. Use RoI as a compass to help you identify the best use of your financial capital, human capital, time and energy at any given point.

Get these three right and you are on a solid financial footing.

Larissa Fernand is senior editor, Morningstar India.

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