How To Start Investing in My Teens, Twenties, Thirties, Forties

New to investing or thinking how to get started? Regardless of which age group you are at, millennial investors Max Koh and Thomas Chua says anyone can learn to build financial independence through investing.

With inflation on the rise, coupled with slow economic growth and high rates of unemployment, experts have warned that we are slowly moving into a period of stagflation. After building your emergency funds, this makes investing all the more important in order not to compromise on our long-term financial goals. Take it from someone who crossed the $1 million mark in his investment portfolio at age 29 - it’s never too late to start.

We spoke to two investors, public speaker and investment trainer Max Koh and Thomas Chua, founder of Steady Compounding to let you in on some tips on kickstarting your investment journey no matter what age you’re at.

Max and Thomas co-founded Zen Investing Academy to equip novice investors with skillsets and provide invaluable insights on market analyses to make the right investment decisions and become better investors.

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Kickstarting their investment journeys with research and risk

For Thomas, his investment journey started when he was 18 years old. While many of us were working on getting pristine report cards, Thomas was already getting his hands into dividend investing, deep-value investing, and technical analysis. After some time, he changed his approach to focus more on investing in high-quality companies.

He felt that putting in the effort to research companies that were able to execute their vision long-term was more sustainable and effective in growing his wealth. He saw the need to hold stocks of good companies that were anti-fragile — referring to those that were able to hold out and survive in times of recession and market dips while refraining from companies that were in debt. 

For Max who started investing in his mid-twenties, his approach was very different. He always had an interest in personal finance and business analysis and saw the joy in day-trading. He often focused on short-term trading that could give him fast money.

However, after a few years, he realised that he wasn’t making money and maybe even made a small loss, which went against his initial goal of making “fast money” in the first place. That was when he decided to change his investment approach.

About four years ago, he started researching long-term investing that would be sustainable for the long haul. Similar to Thomas, he also saw the importance of investing in companies that he had confidence in and took on a very micro approach. Unlike other investors who took on a macroeconomic investing approach by focusing on news and phenomena, he found that focusing on the companies he believed in was more important.

To date, he has two investment philosophies he strongly lives by. Firstly, the management and leadership of a company are far more important than the projected gains. He enjoys analysing business models and seeing how CEOs manage their companies, which is why this approach motivates him to do more in-depth research. 

Secondly, he only invests in industries that excite him, mainly tech, digital advertising, fitness and e-commerce. Because of his working experience in these industries, he believes that he has an edge over other investors who are new to such industries. Having gained much experience in these fields has given him many insights and foresight that not many investors have.

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How to invest in your teens

If you’re in your teens and wish to start investing, both Thomas and Max agree that you should be building up your investment knowledge first. Thomas suggests reading investment books, and his personal list includes One Up On Wall Street by Peter Lynch as well as The Warren Buffett Way by Robert G. Hagstorm. He also advises reading Warren Buffett’s series of letters, available on the Berkshire Hathaway website.

Thomas also advises, “Don’t buy on FOMO and on what influencers are saying. Set a strong foundation in your investment knowledge by doing your research”.

Likewise, Max also urges young teen investors to read more investment books and “open your eyes to the different kinds of investing like property, stocks, value investing, dividends etc because you won’t know which style suits you best”. 

He added that at this age, it’s important to “develop the mindset of frugality and don’t splurge your money away”. The ability to save can affect the future capital that you have to invest with, and it affects how much you can compound and earn in potential gains. He also mentions that you should focus more on developing your skillsets to increase your earning power since your eventual wealth depends on your younger years. “Investing S$1,000 now isn’t going to dramatically change your life” he adds.

How to invest in your 20s 

If you’re in your 20s, chances are you’ve probably gotten some exposure to investing. Whether it’s your peers around you discussing their crypto dips or the aggressive advertising by several brokerage accounts or robo-advisors, you probably have some knowledge of basic investing.

Thomas advises those who have an interest in active investing to research more on companies that have a long growth runway and not to invest in companies that are already at the mature stage of their business life cycle. This is because “the amount of money is going to trace very close to the return on capital of the company along with how far they grow”. Investors at this age have many years for compounding, so it’s best to “select good quality companies that are still growing”, he adds.

Max encourages those in their 20s to continue growing their investing knowledge. And because they would most likely start to have earning power to invest a little, they can take it one step further by finding a proper investing mentor. With so many varying opinions and advice online, having a good mentor who can guide you and learn from can greatly make you a better investor.

He says, “Find a mentor whose investment processes work for you. You should be comfortable with their investment style and approach. If after giving it a go and you realise that it doesn’t quite suit you, go on and find another mentor”.

If you’re afraid of risks, you can start off with relatively safe investment tools like “dollar-cost average into ETFs to build up your interest in the stock market”.

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How to invest in your 30s

By your thirties, you may already have a sizeable pool of savings and some capital to get started. Thomas advises to be prudent and do both passive and active investing at the same time. “You don’t know what you don’t know when it comes to investing. If you don’t have a diversified portfolio, one wrong move and you will make a huge loss”. He suggests investing in S&P500 and setting aside a portion for active investments with higher potential gains.

Similarly, Max also agrees to diversify your portfolio, “especially for those who have a family and even kids”. If you have other commitments, “you should be more cautious with your investments and diversify across asset classes”, he says. He adds that investors have a family to support and take care of, so they cannot afford to concentrate on just one asset class as it brings high volatility.

For those who don’t have any commitments, they can adopt a more aggressive investment strategy by focusing on a few investment vehicles that you feel confident in and comfortable with, like stocks and companies. “At this age with a good base capital, you are able to make the biggest impact on your wealth accumulation by focusing on just one or two vehicles”, he emphasises.

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How to invest in your 40s

If you’re in your 40s, though you don’t have as long a time horizon, you can still build up a steady stream of cash flow by investing in companies that have grown and are issuing dividends.

A point Thomas made is to not pick companies that are already at the end of their S-curve. "You'll want companies that are resilient with strong economic growth potential, " he says, adding that a rough gauge for picking dividends is to choose a company that offers a dividend ratio payout lesser than 40%. “These companies are usually sustainable for the long-term. When the dividend ratio payout is too high, companies may not be able to sustain them." 

For investors who lean towards dividend-paying stocks, he warns that these companies are usually way beyond their prime. “Most of the time, they are reissuing back the capital to shareholders when they no longer see the need to reinvest the money”. 

Investment regrets

Regardless of how great an investor is, one is bound to make mistakes. This applies to Thomas and Max too, who shared with us some of their investment regrets that they wished they could change.

Thomas mentions that the only thing he regrets is not switching over from dividend and deep-value investing to investing in good quality companies sooner. When he first started, he did not see the importance of putting money into a company that he believed in. He adds that the opportunity cost of these lost years could have helped him compound so much money if he changed his investing style sooner

On the contrary, Max shares his biggest investment regret which cost him a six-figure loss. A few years ago, he invested in a fitness company that had a great vision and created a product that Max believed would work. While they were off to a great start, their management team had poor execution and ended up blowing their budget on expansion. Because of this, the company quickly ended up in huge debt, and was unable to save the business in time, leading to a crash in their stocks.

Max advises “no matter how confident you are in the company, sizing your position (which refers to the dollar amount that an investor is going to trade) over quarters is important. Take time to see how they execute their vision and monitor the progress they’re making. If they manage to earn your trust, you can go ahead and invest in the next tranche.” He further shared that his mistake was “sizing in too fast instead of reviewing their progress over quarters”.

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Final advice

When it comes to investing as a newbie, Max advises going in slow. “Investing shows you a different side of yourself since your hard-earned money is involved. You have no idea about your personality, temperament and your threshold to stomach volatility”. He suggests dollar-cost averaging every month or quarter and monitoring how you behave when you invest.

For younger investors, he encourages you to focus more on your earning power since “your ability to compound your wealth is highly dependent on your capital”. Develop your skillsets to command a higher earning power and work on your investing skills to get you far. He also adds that “the ability to invest in stocks is something that no one can take away from you”, so once you master it, you will always have the confidence in your ability to earn back any money lost.

Thomas also shares the same sentiment of growing your investing knowledge by reading up on investment books before investing. You can also head to his website, Steady Compounding, where you can find easy-to-read articles on investing and learning about high-quality growth companies to add to your portfolio.