Why you should start investing young?

If you don’t start investing now, your actually losing money and missing out on the most important thing young investors have in their favor 'compounding interest'. Compounding interest is the amount of money that is generated from money you've already earned from your investments.

You’re losing about 3% of the value of your money every year when you are not investing due to inflation. So after 10 year of sitting on $100 cash it could be worth less than $75. This powerful force can make you a millionaire well before retirement age with saving as little as $70 per month.

How do you start investing?

You don’t even need to be a stock market expert to begin. When investing in the stock market, you don’t need to have a ton of money to start. For young investors and those beginners who don’t want to risk their money, the stock market offers a great place for them to get their money start working for them.

What is the solution?

An ideal investment for young and inexperienced investors is to get on the road to financial independence are low-cost broad market index investments. Warren Buffet states, "A very low-cost index is going to beat a majority of the amateur-managed money or professionally-managed money." Reduced risk, solid returns and it one of the simplest investments you could make. An added bonus is that it takes only minimal knowledge and about 60 minutes to start getting your money working for you.

What's a broad market index?

A broad market index is a group of stocks that you can purchase as one. It allows young investors to buy a collection of top performing stocks that mimic the performance of the entire stock market.

Since these index funds allow you to earn returns similar to the overall performance of the market it greatly reduces the risk. This is an advantage to the beginning investor since it is safer than investing in a single stock or some mutual funds; plus there is a history of double digit returns.

Broad based index investments may not sound like something you know; however if you ever watch the news, chances are you have heard of this investment. The Dow Jones Industrial Average index contains 30 top industrial stocks. The Standard & Poor's 500 contain 500 of a variety of different stocks. The NASDAQ 100 contains 100 stocks that are mostly in the financial and technology sector.

You actually own a small piece of each individual stock by investing in a broad based market index. For instance, when you invest in the S&P 500 broad market index, you're buying a piece of all 500 stocks in that index. So for each S&P index share that you own your actually own 1/500th of companies like: American Express, Google, Ford, Nordstrom, Home Depot, Staples and Yahoo to name a few.

You benefit by investing young because the money you made from your investments makes you more money. As what we had discussed here, remember that it is not too late to start to invest. And don’t forget; invest at your own risk.