Welcome to the world of investing as a young adult! At 17 years old, you’ve already saved 22,000 dollars, congratulations! This is an excellent start and an inspiring milestone. Now, let's dive into the best practices for investing, focusing on diversification and dollar cost averaging. If you have more investment-related questions, feel free to join our community where experienced experts and fellow investors will guide you through the journey.

Understanding the Basics of Investing

Many people mistakenly believe that investing involves taking big risks, like buying individual stocks. However, this is not the most reliable path to profitability. A sound investment strategy should include a diversified portfolio primarily consisting of index funds and ETFs. This ensures that your money is spread across various assets, reducing risk and increasing potential returns.

When setting up your investment plan, consider adopting dollar-cost averaging. This involves investing a fixed amount of money at regular intervals, regardless of market performance. This strategy harnesses the power of compound interest, allowing you to buy more when prices are low and fewer when prices are high. Over time, this can lead to significant growth in your investment.

Key Principles for Young Investors

Here are some essential principles to keep in mind when you start investing:

Research and Learn: Before investing, thoroughly research and educate yourself about different investment options. This includes understanding concepts like dollar cost averaging and the risks and benefits of various investment instruments. Compound Interest: Time is your greatest ally. Compound interest is a powerful force that can significantly increase your wealth over the long term. Starting early and consistently investing can turn small amounts into substantial sums. Stay Diversified: Diversification is key to reducing risk. Avoid putting all your money into one type of investment. Spread your investments across different asset classes to reduce potential losses. Avoid Speculative Investments: Steer clear of speculative investments like Bitcoin or fly-by-night companies with uncertain prospects. Focus on well-established entities with a history of stability and growth. Set a Realistic Budget: Never invest money you need for daily expenses. Only allocate extra income that you can comfortably afford to lose.

The Wisdom of Generosity

In Buddhism, wealth is said to originate from the karma of generosity. Before you invest, consider investing in your karma first. Donate 200 dollars to a charity you believe in. Keeping 800 dollars as a reserve for unforeseen expenses, and investing the rest. Additionally, the recitation of Avalokitesvara's name is believed to bring wisdom and good fortune.

Recession as a Potential Opportunity

The timing of your investment couldn't be better! Reforms and economic downturns, like recessions, can offer significant opportunities for wealth growth. Back in 2012, I started putting a small amount into an SP index fund every week. In February of the previous year, I could buy only 0.8 shares, but now I'm getting 1.21 shares for the same amount. The SP fund was an easy way to begin, and it prepared me for dealing with market fluctuations.

It's important to recognize that the market is volatile and experiences ups and downs. You will find that you make more when purchasing stocks during a downturn. Do not invest money that is necessary for your immediate living expenses. If you have extra income, consider investing it, but plan on keeping it untouched for at least a year or two to allow time for growth.

Starting with Index Funds

As a newcomer to investing, it's wise to start with low-risk investments. Consider SP funds, which are easy to manage and offer a broad range of stocks. Buying small amounts on a regular schedule, such as every week, helps to average out the peaks and valleys of the market, making your overall investment more stable.

Remember, the journey to becoming a successful investor is a marathon, not a sprint. Consistency and patience are your greatest allies. By following these principles, you’re well on your way to building a robust investment portfolio and achieving your financial goals.