Today, Americans are investing earlier than how our past generations invested. Nearly 22% of Gen Z investors started investing before the age of 18! And only 8% of millennials say have done that before. This could be a result of free financial education available to everyone on the internet. However, talking about the financial risks of investing, youngsters are of two minds. At least 20% of teens feel that the stock market is “too risky.”
So when is the right time to start taking financial risks? What are the experts’ takes on this? Let’s discuss.
Smart risk
Before you start taking financial risks to get high returns with your hard-earned money, make sure you have a solid emergency fund that will cover three to six months’ expenses. Otherwise, you might get into unnecessary trouble and debt. Until then, it’s advisable to invest in low-risk low returns windows.
But let’s strike a balance here. This doesn’t mean you must wait until you purchase a home, a car, or have a family. Sometimes it’s also good to complete taking all the risks you can before you have significant and large responsibilities and commitments. When you start early, you have no responsibilities and have more time to recover, if, in the worst case, something goes wrong.
Smart risk advice doesn’t hold only for investing, but also for life choices like starting a business, switching careers or accepting a low-position job with growth potential at a startup.
The news, buzz, and promotion around the stock market might sound exciting, but you must know what you’re doing. Get advice from trusted sources and financial advisors before making crucial decisions.
If you ever get into debt, first payoff high-interest debt and then try paying off other debts. Whenever you can, purchase appropriate insurance policies as well.
Diversify your portfolio
Never invest all of your assets in one place. Diversify your investments to safeguard the overall wealth even when one of the investments goes down. You can easily diversify by investing in different types of assets like stocks, real estate, etc.
Exit strategy
Financial experts recommend youngsters learn hedging strategies in case their financial investments fail. One must be prepared to take positions in both directions as we cannot surely predict how the asset will move. It’s also essential to have an exit strategy to limit the losses. So, get in touch with a financial advisor who will help you with personalized investment and exit strategy keeping your dreams, current situation, and risk tolerance in mind.
