No More Excuses, Young Investors

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Until recently, it has been somewhat easy for young people to put off investing. For example:

index fund.They tend not to have too much money at their disposal most of the time, so it can be hard to meet the minimum investment requirements for many desirable options. The well-respected Third Avenue Real Estate Value (TAREX) fund, for example, is very appealing, with its 2.5% dividend yield and its five-year average annual return of 20% thanks to investments in companies such as Brookfield Asset Management (NYSE: BAM), Vornado Realty (NYSE: VNO), and Vail Resorts (NYSE: MTN). But its minimum initial investment is $10,000.Then there's the issue of time and interest. With the world as their oyster, many young people find it hard to muster the energy to study companies or funds, and to keep up with their investments.

Making matters worse is the fact that young people are arguably more in need of early investing, because unlike the generations before them, they'll find traditional pensions rather elusive, and Social Security not so secure. They stand to really need a sizable nest egg of their own.

Fortunately, the times are a-changing. There's much reason to be hopeful.

Solutions to obstacles
For one thing, financial education is spreading into many American schools. This is a very good thing, as it is likely to help many young people avoid getting trapped in credit card debt and get them thinking about how to grow their wealth over time. And the education doesn't stop in school. Many financial enterprises, including Fifth Third Bank (Nasdaq: FITB) and US Bancorp (NYSE: USB), are offering educational and planning tools and resources for customers of all ages.

Then there's Wall Street. It has, in recent years, been courting young investors with more determination. For example, many mutual funds have significantly lowered their minimum initial investment amounts. As Eleanor Laise recently reported in The Wall Street Journal, Charles Schwab (Nasdaq: SCHW) has reduced its Schwab funds minimum to $100 (from around several thousand). It has also launched a simple "15-minute" IRA account with low minimums, designed to appeal to the young.

Tips for the young
So how should young people proceed? Here are a few ideas:

Fooldom, talk about investing with friends and elders. Resolve to take action soon, and often. Two Fool books of possible interest are The Motley Fool Investment Guide for Teens (which is also applicable to post-teens) and The Motley Fool Investment Guide.If your employer offers a 401(k) fund, take advantage of it -- at least enough so that you're collecting the maximum employer matching funds. Any money your employer chips in is free money -- don't leave it on the table. Whether it's going into your 401(k), IRA, or taxable investment accounts, aim to sock away at least 10% of your income, if you can. The more you invest, and the earlier you invest, the better off you're likely to ultimately be.Invest appropriately. For your long-term dollars, those whose job it is to grow until you retire, you may want to stick completely with stocks. A 100% stock allocation isn't crazy if your investing time frame is very long. For those funds you'll want to tap within a few years for schooling or a home down payment, invest more conservatively. (Learn more in our Savings Center.)Invest automatically. You can often have money regularly and automatically transferred from your bank account to your investment accounts. This can be a great way to keep your investing on track without having to remember to send in checks.Don't think that you have to become a total investing geek, giving up your social life to study annual reports. A simple index fund, such as an S&P 500-based one, can perform well for you over many years. And if you take time to identify and invest in some top-notch mutual funds, they may deliver even higher returns while requiring little effort on your part.

© 2007 Universal Press Syndicate