Globally, a lot of young adults have heard that they should begin investing as soon as possible, but they’re not always sure where to begin. This article will concentrate on the fundamentals of investing, with the aim of providing some guidance on how young adults can handle this area of their personal finances.
What is investing?
Investing is putting money aside with the hope of making a profit later on. Purchasing assets with the intention of earning income or appreciation over time, such as stocks, bonds, real estate, or other instruments, is the usual approach.
Fundamentals of Investing
- Set Goals: Identify your investing objectives, such as retirement, wealth accumulation, or hitting particular financial benchmarks.
- Risk Tolerance: Recognize the risks you can tolerate. While some investments are safer but have smaller potential gains, others carry greater risk and may yield better returns.
- Diversification: Avoid putting every one of your eggs in one basket. To spread risk, diversify your investments among several asset groups.
- Time Horizon: Think about how much time you have to invest. Longer time frames typically lead to greater risk-taking and possibly larger profits.
- Research: Learn about and comprehend the assets or businesses you are investing in before making an investment.
- Grace: Typically, investing is a long-term endeavor. Remain patient and refrain from basing decisions on transient changes.
Investing Options for Young Adults
With any investment, take costs and risks into account. Even if you have a limited income, investing can still be a terrific way to start small and keep adding what you can afford. Here are two investing options:
Option 1: Apps for Micro-Investing
With the help of these apps, you can invest little sums of money up to a few dollars at times in fractional shares of companies or ETFs. They work well for those who have little money to start. While there may not be as many specialized micro-investing apps available in Namibia, there are still some general investment platforms and apps that are available such as:
- EasyEquities — offers low minimum investments and lets users invest in fractional shares, though it’s not just for micro-investing.
- MyFinancialLife by Nedbank Namibia — ideal for beginner investors because it might offer resources and investment opportunities.
- Online Share Trading at Absa Namibia — tthe platform may present chances to purchase shares or exchange-traded funds (ETFs) at a reduced minimum investment amount. All these platforms can still offer opportunities for smaller investments, even though they aren’t specifically made for micro-investments.
Option 2: Savings Accounts
These are high-yield savings accounts and certificates of deposit. High-yield savings accounts and CDs are low-risk ways to grow your savings, but they’re not high-return investments. Please note that banks and credit unions offer financial products called certificates of deposit [CDs], in which you can deposit money for a predetermined amount of time at a predetermined interest rate.
They usually have higher interest rates than standard savings accounts. Banks typically offer various types of savings accounts tailored to different needs and preferences. Some common types include:
- Access Immediately: Investment accounts that provide easy access to funds or liquidity, enabling investors to quickly withdraw or use their invested capital when needed, may be referred to as “access immediately investment accounts.” To comprehend the access and withdrawal features of each investment account, it is imperative to review the particular terms and conditions of each one.
1. FNB: First Save, Call Account, Money Maximizer, and Savings Pocket.
2. Nedbank: Call Deposit Account
3. Standard Bank: Call Account
- Access with Notice: An “access with notice” investment account typically requires advance notification before making withdrawals. Compared to traditional savings accounts, this kind of account frequently offers higher interest rates; however, withdrawals require notification to the financial institution or investment provider within a predetermined notice period, like a few days or weeks. Institutions can control liquidity this way and still give investors higher interest rates.
1. FNB: Flexi Fixed Deposit, 7-Day Notice Deposit, and 32-Day Interest Plus
2. Nedbank: Notice Deposit Account
3. Bank Windhoek-Notice Deposit
4. Standard Bank: 32-Day Notice Account and Notice Deposit
- Access After a Fixed Deposit: Investment accounts with “access after a fixed period” feature money that is locked in for a predefined amount of time before it can be accessed penalty-free. These accounts frequently have better interest rates or returns, but they also come with a time commitment from the investor—it could be months or years.
Depending on the conditions of the account, early withdrawal may incur penalties or result in the loss of accrued interest. These accounts are frequently referred to as bonds, certificates of deposit (CDs), or fixed-term deposits.
1. FNB (fixed deposit) and Effective Fixed Rate Deposit
2. Nedbank Fixed Deposit Account
3. Bank Windhoek: SureSave, Fixed Deposit, and Prime Linked Fixed Deposit
4. Standard Bank: Fixed Access and Fixed Deposit
- Unit Trust: Unit trusts are investment funds that combine the capital of several investors and use it to buy a variety of assets. Real estate, bonds, stocks, and other securities are examples of these assets. Investing in a unit trust is equivalent to purchasing shares or units of the fund.
These units’ value varies according to how well the underlying assets perform. Professional fund managers oversee them and decide on investments on the investors’ behalf. Unit trusts are a well-liked option for many investors wishing to spread their investment risk because they provide diversification, expert management, and access to a range of markets and assets.
1. FNB Unit Trusts
2. Bank Windhoek Capricorn Unit Trust
Each type of investment account comes with its own features, benefits, and limitations. It’s essential to consider factors like interest rates, fees, minimum balance requirements, and the account’s purpose before choosing one. I urge you to visit your nearest bank of choice and consult a qualified financial advisor.
Remember, investing is a personal journey—what works for one person might not work for another. Adjust your strategy as your circumstances and goals change.