A beginner's guide to smart investing

Investments require discipline and commitment in making regular payments.[iStockphoto]

Building wealth may seem like a distant dream or an unachievable hassle, but it is not complex, and people should take up investments from an early age.

A 2023 Deloitte Gen Z and Millennials survey found that while Gen Zs and millennials have established ways to cope with different uncertain economic situations, they have found it harder to plan and invest for their futures. Most of them opt to live a day at a time. This has impeded their journey to investing early in life, which in turn affects their ability to plan for the future.

Encouraging young people to begin investing from an early age lays the groundwork for a financially secure future. By starting early, they can take advantage of the power of compounding to build their wealth and give investments more time to grow. It also gives them time to weather market fluctuations and learn from their experiences which builds their financial resilience.

Orient Asset Managers Investment Analyst Elvin Khama. [Courtesy]

Orient Asset Managers Investment Analyst Elvin Khama shares some tips to help young people start building wealth through smart investing.

1. Set investment goals

The first step in any successful investment journey entails defining clear and achievable financial goals. Whether it is saving for retirement, purchasing a home, funding your children's education, or simply building wealth for financial security, having specific objectives will guide your investment decisions and help you stay focused on your long-term vision.

Investment goals help you define your investment objectives and what you want to achieve in the future by providing a road map that guides your investment decisions. It helps you determine how much you need to invest to achieve your goals and helps you stay focused on your investment strategy.

It also helps you keep track of the progress being made and adjust when necessary to stay disciplined in your investment journey. It instils a sense of purpose and commitment, reminding you of the reasons behind your investment decisions and encouraging you to stay the course.

2. Work with a financial advisor

Financial advisors know and understand market trends and how the market works. While self-directed investing can be rewarding, seeking professional guidance from investment professionals can provide valuable insights and expertise, especially for complex investment strategies or specialized asset classes. 

They will collaborate with you to come up with investment strategies that are aligned with your investment goals. They will also assess your risk tolerance and come up with a strategy that is tailored to suit your investment needs. Additionally, a financial advisor will help you understand the different investment vehicles in the market and finally guide you on the best one in which you can invest.

3. Educate yourself

It is important to note that investments come with risks and that sometimes the market is unpredictable. Acquiring knowledge of the different investment asset classes such as stocks, bonds or even equities will help you to understand their risks and help you make informed decisions on the best investment vehicles to venture into thus striking a balance between risk and reward. Knowledge also helps you understand how the market operates and understand the issues relating to current market performance.

4. Diversify your investment portfolio

Diversification involves spreading your investments across different investment vehicles to mitigate risks. This is because the values of various investment vehicles behave differently under the same market conditions. A diversified investment portfolio therefore lowers the risk of losses by balancing risk and reward.

You can invest in different assets such as stocks, bonds, cash alternatives, among others. It is also important to note that your diversification strategy should be tailored towards your personal financial goals and your risk tolerance.

5. Be consistent

Investments require discipline and commitment in making regular payments. It is important to ensure that you make payments when they are due to ensure that you are on track to achieving your investment goals. It also helps you maximize your long-term returns, thus benefiting from compound interest.

Investing at an early age is a strategic move toward securing a bright and peaceful financial future. It is also a practical way to invest for long-term goals and retirement. It lays the foundations for a secure and prosperous future where one does not worry about finances. The tips above are a great foundation for smart investing towards building wealth.