All good investment portfolios should be designed to spread risk over different market sectors, and geographical locations. They should also contain a healthy balance of low and higher risk financial instruments, to provide the best possible chance of strong growth whilst protecting your capital from unforeseen market events. When you are younger, you can afford to tip the balance a little more toward higher risk instruments than would be wise in later years, as you will have more time to recover from any setbacks that you may encounter. With all of this in mind, we offer 5 investment recommendations for under 35s who would like to start making their money work for them as soon as possible.
Consider These 5 Investment Opportunities Carefully
There is no one-size-fits-all solution as far as investing in the future is concerned: certain people are well equipped to deal with the mental challenges that risk poses whilst others are better suited to the safer financial instruments currently available. Once you have assessed your own personal risk profile and decided what you would like to achieve from your investments, you can create a portfolio tailored to your specific needs by selecting a suitable mix of the following 5 investment options.
- Stocks – Although it is fair to say that they are substantially overvalued in historic terms, stocks and shares are still an attractive investment option when compared to global bond markets at the time of writing. The fact that interest rates are so low makes bonds a particularly unappealing choice right now, which is why many investors continue to favour blue-chip shares, even after taking historic P/E ratios into account. The USA is navigating the stormy global economic waters more serenely than most other nations at the moment, which makes the American stock market the obvious choice for investors who are looking for a better return than bonds are currently offering.
- Global Tracker Funds – In order to balance risk geographically, while still giving yourself the opportunity to enjoy strong capital growth, allocating a portion of your investment funds to global tracker funds is an excellent idea. This option, when pursued in combination with judicial investments in blue-chip US stocks, will help you to avoid putting all your eggs in one basket at the same time as offering you the chance to benefit fully from future upturns in global stock markets. Given that most mutual fund managers underperform stock indices over any given period of time, a tracker fund, whether fixed to the FTSE alone or a global one as suggested here, is the cheaper, more intelligent option as far as most investors are concerned.
- Contribution Matching Pension Schemes - If you are fortunate enough to be working for a company that is prepared to match extra contributions you make to your pension scheme, you should seriously consider taking full advantage of this offer. If, for example, the standard contribution is 5% of your gross monthly salary and your company is prepared to match any extra contributions that you make up to a maximum of 7.5% of your salary, you stand to gain 2.5% of your gross salary every month in terms of matched contributions from your employer. As this can basically be considered as ‘free money’, your extra contributions will most definitely qualify as a wise investment.
- Lifetime ISA - Being introduced in April 2017, the LISA, as it is also known, is designed to help younger people save for a first home purchase or for retirement. Every year, until you reach the age of 50, you can deposit up to £4,000 in a LISA and the government will give you a free 25% bonus, i.e. £1,000 a year if you invest the maximum amount.
- Real Estate - Buy-to-let properties are a particularly good choice for under 35s as far as many investment experts are concerned, owing to the fact they can generate a regular income at the same time as offering the potential for high capital gains. Furthermore, because you will most likely not be contemplating retirement for another 20-30 years, any temporary dips in the property market will be much easier for you to ride out than they would be for more mature investors. There are many other types of property investment opportunities that it may be worth your while considering: which ones are most suitable for you will depend on your personal financial circumstances and your long-term investment goals.