You’ve earned your first salary… now what? It may be tempting to splurge on that big-ticket item you’ve had your eyes on for months, but ask yourself whether that is really what is best for your bank account.

If you want to see your money grow, then you need to start investing from your first paycheck. This will ensure that the money you work so hard for starts working for you, helping you to accumulate wealth and creating a more stable future.

Another good reason why you should invest your first salary is that long-term investment success depends on consistency and discipline. You might make mistakes at the start (that’s to be expected), but over time, you will figure out different investment strategies and build up your portfolio. At first, it won’t be about stability, and growth and losses are normal. However, the main aim of early investments should be to grow your portfolio, focusing on growth-oriented assets that are lower risk and less volatile.

Financial experts recommend categorizing your portfolio into two segments: your core portfolio (80% of your investments) and your satellite portfolio (20% of your investments).

• Core portfolio:

• • • Passive index funds and EFTs that will ensure long-term wealth generation at low costs.
    • Actively managed equity mutual funds that can potentially deliver high returns.
    • Multi-cap or flexi-cap funds that will expose you to several market segments in a balanced way.

• Satellite portfolio:

• • Real estate investment trusts are a good option during times when property prices are expected to increase.
  • Crypto trading can be a good way to get a return, although cryptocurrencies are known to be volatile, and research should be done before investing.
  • Dept funds are ideal during falling interest rate cycles.
  • Sectoral funds are for those wanting to take a higher risk in specific industries.

As is clear from the above, diversification of your investment portfolio is important from the start. Diversification is when investments are spread across different assets, industries, or regions. The aim of this practice is to spread the overall risk of your portfolio. By holding various investments from different asset classes, you’ll be protected if one investment performs poorly.

Here are the different ways to diversify:

• Across industries: Invest in stocks from companies in various sectors to protect your portfolio if there is an unexpected industry-wide event or stock market crash.

• Across companies: Even within a single sector, it’s a good idea to invest in large corporations, start-ups, and SMEs.

• Across countries: Invest in foreign markets to get exposure to various growth opportunities.

• Across timeframes: Some assets have faster returns than others. For example, you can spread your investments across bonds with different maturity dates.

Most financial experts agree that diversification won’t necessarily prevent loss from happening, as nothing is guaranteed when it comes to investments. However, it is a good strategy to reach your long-term financial goals while reducing your exposure to risk. By spreading risk, you’re less likely to lose your portfolio after one disastrous event.

If you’re new to investing, you might feel a bit overwhelmed to take your first salary and use it to buy stocks or bonds, especially if you don’t even understand stock market basics. Fortunately, there are plenty of online sources and financial advisors that are ready to help. You don’t have to take your entire paycheck and invest it, but it is an important first step towards financial security.

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