How to Invest for Young People in 5 Easy Steps

Having a personal investment in the financial market has now become a productive lifestyle among young people or first jobbers. The old view that investment can only be done by people of mature age is no longer relevant. This can be seen from the demographic data of investors in Indonesia, which is increasingly dominated by the young millennial age group.

Based on data from the Indonesian Central Securities Depository (KSEI), it was noted that the number of investors or Single Investor Identification (SID) in the domestic capital market until the end of 2020 reached 3.87 million investors. This figure increased 56% compared to the position at the end of 2019. Of the number of investors, almost half of them were under 30 years old, while the age range of 31-40 years reached 25% of the total number of domestic investors in 2020. In other words, 70% of market investors Indonesia's capital is young people.

If we are unanimous about wanting to start investing in the capital market, try following the guidelines for how to invest in the following financial markets:

Guide to Investing

1. Understand Investment Concepts and Risks

Insurance is basically the easiest financial risk management mechanism. Anything that poses a risk to a person's financial condition should be insured. Although not everything can be insured, there are at least two types of insurance that are very important to have; namely life insurance and health insurance.

For young people, these two types of protection are often ignored because they feel that the risk of getting sick and dying is not too big. Mental protection and health are sometimes considered as the needs of mature age groups who are already married. Of course, this assumption is inaccurate, because no one can predict the risk of getting sick or dying.

So, when talking about which insurance is more important, then the answer is, both buying life protection and buying health protection are equally important. However, if you are still in a situation where you have to prioritize spending premiums, you can consider options based on the following guidelines.

2. Have Clear Financial Goals

The next step if you want to start investing is to list the financial goals you want to achieve through investing. Financial goals are simply defined as a condition that you want to achieve in relation to a certain financial fund target for a certain period. By having financial goals, the way you invest can be more targeted because you have clear targets and strategies.

You can also divide your financial goals according to the target time. First, short-term financial goals are financial goals that you want to achieve in less than 3 years. For example: homecoming and year-end vacation funds, first house down payment funds, and so on. Second, medium-term financial goals, namely the target funds that you want to collect in the range of 3-5 years. For example, marriage funds in 3 years, postgraduate school funds, and others. Third, long-term financial goals, namely target funds to be achieved in a span of more than 5 years. This includes pension funds, children's education funds at universities, and so on.

From each of these financial goals, determine the target funds that we want to realize. For example, a marriage fund in 3 years is Rp. 100 million, a down payment for the first house is Rp. 150 million, and so on.

3. Determine the Investment Instrument

After having financial goals that have been categorized based on the timeframe for achievement, then you can begin to determine the choice of the right investment instrument according to the time horizon of your financial goals and risk profile. The time horizon is very important because it will affect the assessment of the risk of an investment instrument and its effectiveness in helping you achieve the predetermined target of funds. For example, if your financial goal is to prepare a marriage fund in 3 years of IDR 100 million, then the right investment choice is an instrument with a low-to-medium risk level such as money market mutual funds and fixed income mutual funds. Stocks are not recommended for 3-year financial purposes because the risk of price fluctuations is too high in the short term.

When referring to risk grouping based on the time horizon, then you can use the following reference.

Short term financial goals < 3 years
Medium term financial goals 3-5 years
Long-term financial goals above 5 years
In addition to considering the time horizon, in choosing an investment instrument, make sure you also pay attention to your risk profile as an investor. How to check it? You can fill out the risk filling sheet every time you want to start investing. There are 3 categories of risk profile, namely conservative, moderate and aggressive investors.


Conservative investors are characterized by liking a stable investment, not wanting the principal investment (initial capital) to decrease, and not liking fluctuations in investment value. Then, moderate investors are investors who can still accept price fluctuations, hope that their initial capital will not run out completely, and are quite satisfied if their investments grow beyond the inflation rate and bank deposits. Finally, aggressive investors, namely investors who are ready to take the risk of losing their investment capital, are comfortable with sharp price fluctuations because they want their investment to grow many times higher than deposit interest (risk free rate).

4. Open an Investment Account

After having a clear plan of financial goals and a choice of investment instruments, it's time to execute the plan. To invest in the capital market, you are required to have an investment account. How to open an investment account is not difficult. You can do this through the right financial institution such as a securities company if you want to invest in stocks, or an investment manager company if you want to start investing in mutual funds online, and so on.

Usually what is needed to open an investment account is a personal identity card, a Taxpayer Identification Number (NPWP), a bank account number, filling out an initial investment form, and other requirements that you can check at the relevant financial institution. Currently starting to invest is easier with the existence of financial technology (fintech) companies that allow you to start just from a gadget without having to go to the physical office of the company concerned.

Oh, yes, investment capital is also not expensive, you know. You can start investing with minimal capital. For example, a mutual fund investment can start with just IDR 100,000. Stock investment is also not expensive, which is enough to buy 1 lot (100 shares) as a start.


5. Execute Disciplined Investment

In investing, you need to have the right strategy. Strategy helps you optimize the capital you have in order to achieve investment targets according to financial goals. For example, for an equity mutual fund investment, you choose a dollar cost averaging (DCA) strategy or a monthly investment because you do not have specific time to monitor daily stock market movements. There is also a value investing strategy in stock investment, and other strategies that can be chosen according to your convenience and financial goals.

Don't forget to evaluate your investment performance regularly at least every semester. You can check the performance of the investment return reports that are regularly sent by securities or related investment managers.

The five tips on how to invest above can help you get started with investing.

Before starting to invest, it would be better if you start by having financial readiness. Some indicators of financial readiness include: financial cash flow conditions are surplus or not in deficit, controlled debt installments do not exceed 30% of the value of regular monthly income, and already have an emergency fund of at least 30% of the ideal emergency fund target value.

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