Winnipeg Free Press - PRINT EDITION

The young and the invested

The earlier you start investing, the better off you'll be in the long run

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Like father, like son. Michael Kurtas owes a lot of his investment acumen to his father.

"My dad is a really active investor with his money. He's always watching BNN and online checking out stock reports, tips and stuff like that."

So it's no surprise Kurtas took a shine to watching the markets at a young age.

"I would say I started thinking about investing around 15 or 16," says the 22-year-old business student at the University of Winnipeg.

"I'm kind of an analytical guy and choosing smart investments involves a lot of analysis."

According to a recent survey, Kurtas isn't an anomaly.

The average age for generation Y -- people born between 1980 and 2000 -- to purchase a first investment is age 20. In contrast, the boomer generation made their first investment by age 27, according to the TD Investor Insights Index.

Like Kurtas, a significant number (41 per cent) invested as a result of their parents' encouragement while about 36 per cent of boomers say their first investment was spurred by an increase in income.

Cynthia Caskey, vice-president and portfolio manager with TD Wealth Private Investment Advice, says it's a promising sign more Canadians are investing at an increasingly younger age.

"That's because they really have time on their side to save for their goals," she says.

They not only have more time to save, putting away as much money as possible. Their money also has more time to grow their investments.

For the conservative investor, who doesn't want to lose money, they can be happy to sock their money away in fixed-income investments such as bonds or GICs that provide an interest return on their money.

"It's the power of compounding interest," Caskey says. "When you have interest that is added to your investments, your interest then starts to earn interest."

But there's another advantage to starting early. Young investors can invest in riskier assets that may be volatile over the short term -- they go up and down in price -- but these assets are more likely to provide greater return than conservative investments over the long term.

"When you're young, you can look in volatility in a completely different light," she says.

With time, you can buy stocks or stock-based funds for the long haul. And the more consistently you invest over time, the better the results will likely be.

"Then you have what's called dollar-cost averaging working for you," she says.

"By having a regular investment plan, then you don't have to second-guess yourself. It's not like you're betting the farm at any given point in time."

Kurtas says he intends to follow a similar strategy, only it will be a collective effort. He and eight other schoolmates are starting an investment club.

"We're all graduating this year, and we thought we would pool our resources because individually, we don't have a lot of disposable income to buy Apple stock, for example, or anything with a higher share value," he says. "By pooling our resources, we can take advantage of economies of scale both in trading fees and also in being able to buy more substantial positions in companies."

With an education in business, Kurtas and his colleagues are already relatively further up the investment ladder than most people his age.

He admits investing can be a bit of an obsession.

"You could compare it to gambling. When you win, it makes you want to do more. When you lose, it sucks," he says. "It's almost entertainment. You get almost immediate feedback on your selection in terms of its performance."

For the uninitiated, however, investing might appear to be the opposite of entertainment, seeming more like difficult, bewildering homework than amusement.

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"When you've had no introduction to it, it can be very intimidating," says Bob Stammers, director of investor education at the CFA Institute in New York.

That's why it's critical for parents to teach their children about the birds and the bees of investment.

"If they're not getting it from their parents, then they're really on their own to find different information sources," he says. "This is where it can be difficult, because if they're looking at investment products, problems can arise because there are lots of marketing messages out there that can convince investors to buy products that might not be suitable."

Like a lot of parents, Stammers helped his daughter buy her first investment -- Apple stock -- based on her interests.

"She chose it because she could touch and feel the product," he says. "But it was more of a learning experience than trying to turn a profit."

Following a stock on a daily basis, watching its price rise and fall, and understanding why its value changes over time provide a valuable learning experience -- regardless of whether the investment ultimately makes or loses money.

Kurtas says his dad helped him buy his first stock at age 17. But he says novices are best to start slowly with mutual funds available through their financial institution. They can invest small amounts -- $25 a month, for example -- and learn about investing at the same time without as much cost and less risk than purchasing individual stocks.

No matter how it's done, the take-home point is to invest as early and consistently as possible.

"If someone is continuously putting money away from when he or she was young, think about the amount of savings and the compounding return," says Stammers. "You don't need to earn a lot over a long period of time to amass a significant amount of money."

Although it's tough for young people to set aside the money when cash is hard to come by, the longer they wait, the more likely it is they'll be even more cash-crunched later in life, Caskey says.

"If you try to pour it on at the end, you may actually end up compromising your lifestyle quite significantly later in life just to come anywhere close to what you would have if you engrain it as your savings strategy early on."

Republished from the Winnipeg Free Press print edition August 31, 2013 B12

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