Four experts give advice for young adults on how to start investing – Diana Clement

Young investors can easily learn how to invest, but they need to be careful. Photo / Andrey Popov

Taking a punt on crypto, options or the next up-and-coming company’s shares is a great way to learn about investing. Especially for newly fledged adults in the 18- to 25-year-old demographic.

But it needs to be done with guardrails. There’s nothing that kills investing enthusiasm more than losing all your money, as Simplicity founder Sam Stubbs said.

I asked Stubbs and three other parents of young adults for their insights on risky investments that 18- to 25-year-olds can learn from.

Sam Stubbs, CEO of Simplicity

Sam Stubbs, chief executive of Simplicity, said quite rightly that young people need a KiwiSaver account and to contribute to it before getting started on riskier investments.

“You’re still in the habit-forming stage of life and the habit you learn is regular savings [and] dollar-cost averaging,” he added.

By all means, invest small amounts in risky investments, he said. “Some lessons have to be learned the hard way [such as] you can’t beat the markets [in the long run]. Just make sure you are as diversified as you can be. I would say at least 10 different types of investment. Not 10 meme coins.

“We want these kids to get rich, but I think they primarily need to learn that the real trick is to get rich slowly,” Stubbs said.

Katrina Shanks, CEO of ANZIF

Thanks to KiwiSaver, the current crop of young adults has more investing knowledge than any time in history, said Katrina Shanks, chief executive of the Australian and New Zealand Institute of Insurance and Finance (ANZIF).

Whether it’s crypto or individual shares traded on Sharesies, Shanks advises having some guardrails in place.

“The guardrail is understanding that you don’t use money you need for the long term [to buy risky investments]. Use coffee money or beer money.”

She recommends considering exchange-traded funds [ETFs] that spread investments over multiple stocks.

“Crypto is now in ETFs as well,” she added.

Another advantage for young adults who want to learn through experience is that they have access to apps such as Sharesies and EasyCrypto. These are hugely popular and gamify investing.

The apps also mean young investors can be more agile, buying and selling quickly when market conditions change, Shanks said.

Young adults can gamify their investments by using apps like Sharesies and EasyCrypto. Photo / 123rf

Warren Ngan Woo, Westpac’s financial manager: financial wellbeing

One of Warren Ngan Woo’s favourite quotes comes from Benjamin Franklin: “An investment in knowledge pays the best interest.”

Investing small amounts such as $10 a week is a good way to boost that knowledge.

While KiwiSaver is important, there’s a lot to be learned from buying small investments through platforms such as Sharesies, Tiger Brokers, Hatch and Stake, said Ngan Woo.

“They offer the opportunity to learn [and] find out about companies.”

As well as parenting his own, Ngan Woo often works with groups of young adults and sometimes recommends that if they’re buying products from a company, they should consider investing in it.

That could be Apple, Auckland Airport or The Warehouse. Start reading the business news and guides on platforms such as Sorted.org.nz, he said.

The important thing is not to put too much money into one investment, no matter how much you think you can predict the future.

Ngan Woo warns the young adults he works with about hype and Fomo (fear of missing out) around high-risk investments.

Crypto, in particular, comes with extra risks thanks to the lack of regulation.

“Only invest what you’re willing to risk because it really is a gamble.”

Mark Patton, financial adviser at Stuart Carlyon

Even if the amount is small, the lesson can be significant, Mark Patton says.

“Even $100 [can be] meaningful. If you lose that on a crypto [investment] or stock such as GameStop, in the grand scheme of things, your future self will say that was a pretty cheap lesson.”

Sometimes young investors don’t even realise they’re taking a punt on what seems like a sure-fire winner. “And that’s where the hard lessons come in.”

Young adults do have advantages over their parents. KiwiSaver, for example, is teaching them the fundamentals of investing, such as risk and reward and the ups and downs of markets. Patton said markets are volatile and risky trends like crypto only amplify that.

But overall, Patton sees a shift in financial awareness, in part due to KiwiSaver. “Everybody gets it, that it goes up and down and they can see it regularly and they don’t get too fazed about it. So I think we’ve matured.”

Finally, the message is clear: for the cost of a few coffees a week, young people can build valuable financial knowledge without putting their future at risk.