What Investing Should Mean For Young Adults In 2023

Mar 01, 2023


This should be personal finance 101 in general but especially for young adults. What does investing mean? You need to look at investing if you really want to get ahead financially. We work hard for our money. We save some of it realizing we may need it down the line. Something is missing, though. What could it be?


All of a sudden, a bell starts to ring in our heads. In a true partnership, we should both be working, right? I shouldn’t be doing all the work! That means my money should be working for me too! Welcome to the world of investing.

Most people, when they hear this word, think of the stock market or real estate. It’s true; these are forms of investing. Investing is more than just putting money into getting more money. At its root, an investment is the spending of money on something that will give you a return. That doesn’t have to be a stock or real estate.

The return also does not have to be measured in money directly. For instance, a person gets a job at a warehouse, and they buy more comfortable shoes to help them at work. This is an investment for themselves because they are getting a return in the form of less effort and feeling better.

These 2 factors could lead to more money because they can now work more overtime. It could also not result in more overtime. Regardless, it’s an investment in both cases. An investment can give you a return in how you feel, in cashflow, in leads for your business, in referrals, etc. The point is that the money you spend gets you a return. With that picture being painted, all investments fall into 2 arenas: Direct and indirect.


Direct Investments


These are the stereotypical things you hear about when it comes to investing. Making money from the stock market. Making money from real estate. Buying gold when it’s low and selling when it’s high. Here is where your assets are. Assets are the exact opposite of liabilities in the expense section. An asset puts money in your pocket. What kind of money and how often is up to you. Direct investments boil down to expecting one or both of these 2 things:

  1. Cashflow from the investment
  2. Capital gains based on the appreciation of the asset
  3. Both 1 and 2 

You must take the time to educate yourself on both the art and science of direct investing. Not doing so can turn investments that have the potential to be assets into liabilities. Yes, this means you can lose money. It’s often not even the investment per se that is risky, but rather the inexperience of the investor.

Let’s take a look at 2 people who are investing in a stock. One has taken courses on investing, and the other has not. Person A who has no education on investing buys stock in the said company. Person B who has the education waits to buy. The share price drops. Person A gets a little nervous.

Person B finally decides to buy some shares. The price drops further. Person A panics! With the fear of losing their money, they sell their shares and accept the loss. Person B looks at the earnings reports of the said company and matches it up to the company industry.

They come to the conclusion that this is part of a 5-year cycle where they face temporary delays. He then looks at information from the past 15 years and sees this same pattern. The company always rebounds. More importantly, Person B remembers that it is the holidays, and people are pulling money out of the stock market to buy gifts. Person B buys more shares.

A few months later, the share price is 25% higher than it was when both bought. Person A is scratching their head, thinking WTF? Person B has made a capital gain of 25%, and they could sell or hold as the share price keeps rising. What was the risk factor in that scenario? The stock, the market, Person A or Person B. It was Person A since they lacked education and control over themselves.

I know you were probably expecting some complicated formula, but it is that simple. One must have the education and control over themselves to benefit here. Direct investments are also things that you spend money on that you do so with the expectation of making more money in the very near future.

With me making money from my phone via apps, if I got another phone with a better data plan or if the phone was faster, this would be a direct investment too. Also, keep in mind that if you are in debt, and you are paying more than the minimum amount on that debt, the difference between the minimum amount on that debt and what you pay is also an investment.

This is the case because it can cause the debt to be paid off quicker. Once paid off, the cash flow that was going to the debt is now going back into your budget. We can’t forget about the other form of investing, though, indirect investing. 

A quick note on direct investments: Make sure you keep an eye out for how you can keep your expenses and fees low. If you are paying fees or expenses, make sure you know why you are.

In addition to this, you’ll also want to take care that there isn’t a cheaper or fee-free option available that offers what you need also. A perfect example of this is when people use expensive brokerages in order to get started that charge trading fees. Upon further research, they discover that there are free brokerages like Robinhood, M1 Finance and Webull that are fee-free and offer what the other brokerages do. Don’t let this be you. Be well informed before you get your wallet or purse out.


Indirect investing


This is the more forgotten of the 2. Person B, in the above scenario, clearly invested in their education before actually investing in a direct method. Investing in education can be a form of indirect investing. It can be indirect because you may not see an immediate payoff.

The shoe example of the warehouse worker mentioned before is also an indirect investment. It’s having a positive impact on how the worker feels and on the level of effort being putting out. They could say the right thing at the right time due to feeling normal instead of saying nothing due to their feet hurting.

This could land them an interview for a promotion. They now could have more physical and mental energy once they get home to do more constructive money making activities than watching TV to recuperate from a hard day's work.

Do you see the ripple effects just buying some new work shoes can have? It’s my view that this form of investing is hugely underestimated and taken for granted. It is here where investing is subtler, and things tend to line up in the background without you even noticing sometimes.

Am I saying that indirect investing is better than direct? No, I’m not. Most people who do invest only do so in one of these ways. They are 2 sides of the same coin.  You will be more abundant financially if you see this and spend money on both when it comes to investing.

If you're looking for more information on personal finance for young adults, you can checkout my free E-book/Audiobook, Steal my financial blueprint. In it, I lay the blueprint that all young people need to implement to ensure that their money is going in all the appropriate places to take care of them, both today and later in life. You can get the book here.