The year 2020 saw extreme volatility in the investment market. Recent statistics suggest a significant increase in trading activity in the market from young investors who are taking advantage of the investment opportunities available.

What to look for as a young investor

As a young investor, your focus should be on growth-oriented assets, since you have decades ahead of you to make back any potential losses. Growth-oriented investments carry higher risk and higher volatility; with great return comes great volatility. Investing may seem complicated to the young however, it does not have to be if you set a plan and put it in motion.

A good place to start is with an investment firm or a brokerage house where you can gain access to a variety of products and services. It is best to work with a professional advisor, particularly if you need more handholding with a specific issue. Ensure that you find someone who is truly working in your best interest. My colleague, Dwayne Neil, recently wrote an article titled ‘Questions to ask your financial advisor’ that offers guidance on finding the right person.

Starting your investment

First, consider setting up a standing order. This means you instruct your bank to pay a specific amount of money at a regular interval to your investment account. This will allow you to commit to saving on a monthly or quarterly basis without having to make a deliberate decision or choice each month as to whether you wish to save, can save, or not save at all. Putting this decision and action in place will guarantee that you save. Most financial experts recommend that you save at least 12 per cent to 15 per cent of your salary/overall income to achieve a secure retirement plan.

Find an advisor and discuss your investment objectives, whether it is for growth, capital preservation or both. During this discussion, ensure you examine your risk tolerance as this is a critical part of how your portfolio is structured. Ascertaining your risk tolerance, whether high, medium, or low, along with your age, stage, and time horizon are key to selecting a product that will suit you.

The good news is that there are more attractive options for first time investors than ever before. There is a suite of investments presently offered in the market and many of the more attractive investments are denominated in US dollar currency.

We would recommend that young investors pay close attention to mutual funds, unit trusts, bonds and stocks. We suggest young investors resist the temptation to rely exclusively on advice from online forums or recently created trading applications that allow the easy trading of stocks, derivatives, and use of margin. Instead, invest in a variety of stocks and in a mutual fund that invests in a diversified mix of international bonds and stocks. With youth on your side the sky is the limit, you have many working years ahead of you, so starting to invest now will benefit you greatly in the future.

Lisa Minto is the AVP, Financial Planning at Sterling Asset Management. Sterling provides financial advice and instruments in US dollars and other hard currencies to the corporate, individual, and institutional investor. Visit our website at www.sterling.com.jm

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