Top money lessons novice investors wish they had learned sooner

Thomas Emerson, 27, a British expatriate working in the UAE’s mining industry, started investing two years ago but now wishes he'd learnt some crucial money lessons earlier.

“I wish I had put a portion of my salary aside every month to grow and invest for the future and not lived purely for each day,” he says.

“I also wish I had been told how important it is to save for your older age and retirement because compound interest has more of an opportunity to work its magic. It could also mean retiring early rather than working an additional five years or so.”

He primarily invests in equity funds and has a small share of bond investments. Mr Emerson has also dabbled in cryptocurrency investments in the past, he says.

A 2020 survey by US personal finance website MagnifyMoney found that the biggest regret among respondents is not investing sooner. Three in four respondents regretted not investing earlier, while 69 per cent of Generation Z and 77 per cent of millennials also said they should have invested sooner, the survey found.

The top five most common investing regrets were: not saving for retirement sooner (31 per cent), not investing in stocks sooner (24 per cent), not purchasing a certain stock earlier (21 per cent), selling a stock too early (16 per cent), holding on to a stock for too long and taking money out of retirement, both of which are tied at 14 per cent, according to the survey findings.

Thomas Emerson, investor in the UAE

We spoke to personal finance experts for their advice on the top money tips investors wish they had known earlier.

Saving for retirement is a big job but it is much easier when spread over a long period, says Rupert Connor, a partner at Abacus Financial Consultants.

Spreading saving for retirement over 25 to 40 years is much easier than trying to do it in 10 years. A catch-up strategy is difficult and unpleasant due to the cost of delay, he says.

“Most of us start understanding and fretting about our retirement funds when we reach our mid-30s or early 40s, however, it is best to start investing in your retirement fund in your 20s due to the power of compounding [interest],” Vijay Valecha, chief investment officer at Century Financial, says.

The sooner you start a retirement plan, the more benefits you are likely to enjoy later, experts say.

It is vital to contribute as much as possible towards your retirement plan and begin as soon as you start earning, Mr Valecha recommends.

“This will help you build a big corpus for your golden years. Look at this as a dependable way to remain financially independent for your entire life,” he adds.

Don’t be afraid to talk about investing

Sharing experiences and asking others for advice is a great way to help your investments grow, says Sophia Bhatti, a partner at financial advisory Hoxton Capital Management.

“Knowledge is power. The more you know, the better decisions you will make rather than just going off your own advice,” she adds.

Investors should also make an effort to learn about different investment options to obtain good returns.

To get started, you can keep money in your bank account and keep earning interest on it. However, to get higher returns, you need to learn about investing your wealth outside your bank account, Mr Valecha says.

Vijay Valecha, chief investment officer, Century Financial

“It is essential to understand the various schemes available for investment, such as mutual funds, provident funds and equities, and invest in one of them to gain benefits. The earlier you start investing, the higher the returns you will get.”

To expand your savings, you should pay yourself an affordable amount each month, for example, 10 per cent of your income, Ms Bhatti says. Doing this means your savings pot will grow, she adds.

Looking at the basic breakdown of budgeting and saving, it is said that the 50:30:20 rule is the optimum way to manage your income and generate savings. In layman’s terms, you should spend 50 per cent of your monthly income on necessities such as food, rent, transport and other essentials, 30 per cent on things you want and 20 per cent on savings.

“It is also important to set yourself a goal, either monetary or a house purchase, for instance, so you know what to work towards,” Ms Bhatti says.

There is no better time to start thinking about saving for our future than today, according to Mr Connor. “Begin investing early, be patient and let your money thrive over time,” he says.