How A 12-Year-Old Started Investing At Age Seven
How A 12-Year-Old Started Investing At Age Seven
One of the key regrets for investors is not starting earlier and investing sooner in their lives. Rishi Vamdatt has no such regrets, as he started to invest in the stock market at age 7 and started promoting financial literacy online through Youtube at age 8.
On Money and Me, Michelle Martin spoke with Rishi Vamdatt, creator of the web and video resource Easy Peasy Finance, about his investing journey and how young people can start investing early like him.
Michelle Martin: How did you get started investing at age seven?
Rishi Vamdatt: Before I turned six, my parents have been involving me in their day-to-day activities relating to money. So, I started to be interested in finance in general. As I was learning more, one of the things that I found most interesting was the power of compounding. I was very fascinated after I learnt about how money can start to grow so much more if one invests. When I was seven, I decided to start investing for my retirement because I knew the importance of it.
Michelle: Share with us, what is in your investment portfolio?
Rishi: My first investments were in individual stocks. However, as I continued to learn, I changed my investment strategy. Now, I invest only in S&P 500-based index funds, which is what I would recommend to beginner investors as [one of] the best ways to start investing.
Since the S&P 500-based index funds track 500 different stocks, investors don't have to worry about diversifying in different sectors because it already takes care of all the diversification and invests in the broad market. They can just focus on investing the money and letting the index fund do the work for you. I also don't have a lot of money that I can use to invest. So, instead of buying 500 different stocks, I invest in index funds and still get the same level of diversification.
Michelle: How do you feel when the S&P 500 falls?
Rishi: Actually, I don't even realise when the S&P 500 falls because I don't look at the daily market fluctuations since I'm investing for my retirement. Instead of feeling upset that my current investments have gone down in value, I actually feel happy that I'm able to buy more shares of my index fund now because I use the Dollar Cost Averaging strategy, where I invest a certain amount of money every month regardless of how the market looks. So, to me it's like getting it at a discount!
Michelle: How much of an allowance do you get every week and how much of that goes towards investing in the S&P 500?
Rishi: Right now, I get $12 a week, which is my age, and I invest all of that into the S&P 500 index funds. Since I was 7, I've been investing my entire allowance because I know just how important it is to invest. Instead of using it to buy something now, I know that I'll be able to get a lot more down the line in my retirement with the same money.
Michelle: What do you think are important principles for young investors?
1) Start early in your investment journey
A lot of people wait until they have more money or more expertise before deciding to invest, but it's important to start investing money early because of the power of compounding.
2) Stay focused on investing for the long-term
Although it is easy to be tempted into day trading or speculative investments, it's important to stay focused and invest for the long-term because that's where you can take advantage of compounding, which will lead to better returns.
3) Do not fall for trending stocks
New investors may think that it's a good idea to invest in trending stocks such as meme stocks or “Best stocks for 2022”. However, it's important to not get distracted by what people are saying now. In the long-term, broad-based index funds are the best investments so I would recommend sticking with those.
Michelle: What is the best way to save?
Rishi: Often, people spend money first before they save or invest what’s remaining, but finding not enough left to do so. A great way to counteract this would be to ‘pay yourself first’. Before you have the chance to spend the money, allocate a portion of your money to automatically go into saving or investing only. In this way, you will unlikely spend this amount of money you’ve already set aside to save.
For more, tune in to Your Money with Michelle Martin from 9AM to 12PM.
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This interview was broadcasted on MONEY FM 89.3 on 29 April 2022.
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