Young investors on their laptops.Choreograph/Getty Images/iStockphoto
Our reader's question: I'm 20 years old. How do I go about investing for the first time?
Globe Investor columnist John Heinzl's answer: I had a lot of interests when I was 20. Investing certainly wasn't one of them. So kudos for getting started so early. But there's really no rush.
If you're in school, your focus should be finishing your education and then finding a secure job – no easy feat in this market. Once you have found stable employment, you can turn your attention to saving, which is the first step in a successful investing plan.
Many young people find saving difficult, because costs for housing, food, cellphones, entertainment, clothing and other expenses can add up. I recommend keeping track of every penny you spend for several months. You can do this with a pen and paper or by reviewing your bank and credit card statements every month. Only then will you be able to determine where your money is going and therefore where you're able to cut back to save more.
At first, you can park your spare cash in a high-interest savings account. This won't make you rich, but at least your money will be safe as you embark on the next part of your journey: learning everything you can about investing. Read newspapers and websites; visit your library; watch investing videos on YouTube. It will all seem foreign at first, but it will eventually start to make sense.
I can't stress enough that there are a lot of bad investing products out there and a lot of dubious advice. The successful investors I know have learned to manage their own money rather than let someone else – who may or may not have their interests at heart – do it for them. They also keep it simple and avoid anything they don't understand.
When you're ready to take the plunge, do a google search for low-cost Canadian index mutual funds. This is a great place to start. Eventually, you may graduate to exchange-traded funds or to managing a portfolio of individual stocks. But this will take time.
If you are super keen to get started and want to start researching, check out the Globe and Mail's Gen Y Money website. It's a hub for personal finance and investing information targeted at young adults. It's got nifty calculators, videos, links, and other packages, including our Ultimate Gen Y investing guide. We also run a Gen Y money Facebook page, where young people can ask and answer money and investing questions.
John Heinzl