Top tips for young investors
- Robin Powell
- Mar 24
- 4 min read
Starting to invest early offers a powerful advantage because it gives your money more time to grow through compounding. ANDREW HALLAM began investing at 19 and achieved financial independence before turning 40.
Andrew highlights that staying calm and continuing to invest during market downturns is just as important as starting early. Fear can lead to costly mistakes, but so can greed. Learning from his own experience during the dot-com boom, Andrew encourages young investors to focus on steady, disciplined investing.
Automating your investments can help remove emotional decisions and make investing consistent, much like a tax payment. This approach builds a solid financial foundation without requiring constant effort or temptation to spend.
Key takeaways
1. Young investors should start investing as soon as possible
The power of compounding rewards investors who start early. Even small, regular investments at a young age can grow substantially over decades.
2. Don’t panic when markets fall
Market declines should be seen as opportunities to buy at lower prices. Emotional reactions to falling markets often cause young investors to miss out on long-term gains.
3. Automate your investing
Setting up automatic monthly contributions to a diversified fund prevents the temptation to spend money and ensures consistent investment without hassle. This discipline builds wealth over time.
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TRANSCRIPT
Robin Powell: The sooner you start investing, the more you benefit from compounding later on.
Investment author Andrew Hallam began investing at the age of 19 and was financially independent before his 40th birthday.
But just as important as starting early, Andrew says, was the fact that he refused to panic whenever markets fell and just carried on investing.
AH: When markets fall, young people should celebrate. And this is what Warren Buffett says. It's much like a supermarket sale. And imagine buying perishable nonporous items like cans and beans in the supermarket. And imagine that you are buying them every single week. If cans of beans go on sale.
We don't walk into the supermarket and freak out, say wow, the cans of beans that I'm buying every week have just gone on sale, so I'm not going to buy cans of beans this week, I'm afraid, because the price is dropping.
That sounds psychotic, but that's exactly how we react to stock market declines. And that's why if you're a net purchaser of stock market investments, especially if you have at least five years until your retirement date, if you're a net purchaser of stock market investments, you should actually celebrate when stock markets drop. You shouldn't be upset.
RP: Fear can be a very expensive emotion, but so can greed.
Andrew admits he made mistakes particularly during the so-called dot-com boom of the late 1990s.
A painful memory was selling a high-flying stock called Nortel, and then changing his mind and buying it back.
AH: So I sold it on a Wednesday. I still remember this. And then on the weekend, I'm reading a newspaper and there was this really great article quoting a wide variety of experts who were saying that Nortel Network was going to see $200 a share before the end of the year. So I bought it back at $124 a share.
No sooner did I buy it back that it began its spiral down hill. I think it got to about a dollar a share. I sold it on the way down at about $60 a share and so broke even. But wow, did I ever learn my lesson.
RP: Investors should really avoid buying individual stocks altogether.. It’s far better to use funds instead.
Another useful tip, says Andrew, is to automate your investment process.
AH: So it becomes like. Like a tax. So the investor isn't tempted to spend it because it disappears right away at the beginning of the month. And that allows people then to dollar cost average.
So if they're investing money when they have it as they have it and it comes into their account, let's say an automatic withdrawal, so they'll set up for $100 a month to be withdrawn from the account automatically into a diversified portfolio or into an index fund.
It takes the sting out of it because they don't have to manually make that purchase. They don't have to manually take money that they would otherwise be tempted to spend. It just disappears like a tax, and then it automatically goes towards building a foundation for their future.
RP: So, start early, don’t give in to fear or greed, and automate your investments.
It’s that sort of discipline that really pays off in the long term.
