Q&A with Apricot: How to start investing for a child’s future?

Welcome to our “Q&A with Apricot” series, where we address your most frequently asked questions about investing. Today, we’re discussing a topic that concerns every parent: How to start investing for a child’s future.

Many parents want to create a solid financial foundation for their children by building capital for their education or simply for the start of their future life. Investing is a powerful tool to achieve this goal, as it provides an opportunity to grow capital over time.

Why Start Investing Today?

The best way to grow capital over time is to start early. This is especially important for long-term goals, as it allows you to benefit from the power of compound interest. Thanks to compounding, the sooner you start saving and investing, the more time your money will have to grow, even if you make small monthly contributions. This happens because, in addition to your initial capital, you reinvest the earnings, and future growth is registered not only on the initial capital but also on the reinvested earnings.

For example, if you invest an initial capital of $1,000 and then add $50 per month over 20 years with a 10% average annual return (which roughly corresponds to the average return of the S&P 500 index over recent decades), your total investment will be $13,000, but thanks to compound interest, your account will have approximately $41,092.

Source: https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator

Choosing Investment Tools

When investing for a child’s future, it’s important to choose tools that align with your long-term goals and risk tolerance, applying the risk management strategies we discussed in previous posts. Beginner investors, especially those who do not wish to actively manage their investments, often prefer tools that allow for passive investing. These include:

• ETFs (Exchange-Traded Funds) | ETFs allow you to invest in a ready-made “basket” of securities, easily diversifying your portfolio. These “baskets” can be sector-specific or track market indices. They are managed by professionals, which is convenient for investors who don’t have extensive knowledge in the investment field.
• Bonds | This is similar to a loan you give to a government or a company, who then returns the principal to you at the end of the term and pays interest (a coupon) during the term. Bonds are considered lower-risk instruments. They provide a stable income and capital preservation.

Stocks, which are considered higher-risk instruments, can also be of interest to these investors due to their long-term growth potential. Here, asset allocation, which we discussed in one of our previous posts, is important.

Key Strategies for Successful Investing

• Start as early as possible | Time is your greatest advantage. Even small, early investments can grow into significant capital over decades.
• Be consistent | Regular monthly investments can help you accumulate capital.
• Diversify your portfolio | Spreading investments across different asset classes and sectors helps reduce risk.

With Apricot Capital, you can start investing for your child’s future by taking advantage of our low commissions and access to over 40 global markets.

Ready to Start Investing?

Open a brokerage account for free and download our Apricot app from the App Store or Google Play. Learn more about investing in Apricot Academy. 

It’s important to remember that investments are subject to market fluctuations and carry inherent risks. Consider your financial goals and risk tolerance before investing.

Apricot Capital is regulated by the Central bank of Armenia.

*The examples in this text are for illustrative purposes only. This does not constitute investment advice or a recommendation to buy or sell any specific investment instrument. The past performance mentioned in this text is not indicative of future results.