1) Explain why is it important for students to invest in their early 20s? What questions should be answered before taking any investment decision?

 

• At an early 20's an individual is able to acquire more human capital.
• At a young age one is able to study, research and apply online investing tools and techniques.
• Young investors have the flexibility and time to study investing and learn from both successes and failures.
• At a younger age one is able to take on more risk.
• Time.

Step-by-step explanation

At an early 20's an individual is able to acquire more human capital.

Human capita is the present value of all future wages. Investing in oneself by earning a degree, receiving on the job training or learning advanced skills is a valuable investment that can have strong returns.

Young adults often have many opportunities to increase their ability to earn higher future wages, and taking advantage of these opportunities can be considered one of the many forms of investing.

At a young age one is able to study, research and apply online investing tools and techniques.

Online trading platforms provide countless opportunities for both fundamental and technical analysis, as do chat rooms and financial and educational web sites.

Technology, including online opportunities, social media and apps, can all contribute to a young investor's knowledge base, experience, confidence and expertise.

Young investors have the flexibility and time to study investing and learn from both successes and failures. Since investing has a fairly lengthy learning curve, young adults are at an advantage because they have years to study the markets and refine their investing strategies.

At a younger age one is able to take on more risk.

An investor's age influences the amount of risk he or she can withstand. Young people, with years of earning ahead of them, can afford to take on more risk in their investment activities. 

Time.

Even if the money may be tight, young people have a time advantage.

They have time to move and invest as they are not tied up by family responsibility.

There is a reason that compounding the ability to grow an investment by reinvesting the earnings.

Questions you should ask before making an investment.

• What are the likely returns of the investment.
• The time span the investment will take to give returns.
• What is the capital required for the investment.
• What are the goals of the investment.
• What are the risks of this investment.
• How much do you expect to earn on this investment.
• How long do you plan to invest.