Your 20’s are the perfect time to start investing. And these 7 tips for investing in your 20s will help you venture into the world of investment like a pro!
There is a reason they call the 20’s your prime years. This is simply the age of freedom, where you choose your career path and embrace everything that the world has to offer. And while there are thousands of decisions you make during this period, the best decision you could make is to start investing.
But, you might wonder: Are the 20’s a little bit too early to start big investments? Not at all! Investing as a young adult can help you prepare for a financially stable future, even achieving financial stability as early as your 30s. Consider these 7 tips for investing in your 20s that will help you make the best investment decisions:
Determine Your Goals
Think about the goals that you intend to achieve when you invest. These could include experiences you want to enjoy over your lifetime, such as traveling outside the country every year, retiring by age 60, or buying a car in a few years.
Once you outline your goals, separate there into short-term and long-term goals. Then, establish a plan and identify which investments will help you attain your goals at your desired timeline.
Use a Robo-Advisor or an Online Broker
What long-term goals do you have apart from retirement? It could be planning for your child’s education or making a down payment for your home. You would do well to use online brokers, such as TD Ameritrade, for such investments.
Alternatively, choose a Robo-advisor, which is more accessible for young people with little capital. For example, you can compare the Motley Fool vs Morningstar Robo-advisor and choose which appeals to your goals most.
Contribute to a Retirement Plan
There are plenty of employer-sponsored retirement plans that you can invest in your 20s. The most recommended plan is the 401 (k). With this retirement plan, you can invest money whose tax has not been deducted yet. As you save up the money, its tax is deferred until it is fully withdrawn during retirement. The tax benefit provided by the 401 (k) plan makes it an ideal investment for those looking to secure their financial future.
Create an Individual Retirement Account
An individual retirement account (IRA) is a financial strategy that allows you to invest on a long-term basis. There are two types of IRA that you can invest in during your 20s:
- Traditional IRA: These accounts are similar to the 401 (k) retirement plan; you add money on a pre-tax basis, and it goes tax-deferred until withdrawal.
- Roth IRA: These contributions are added after taxation. However, distributions that qualify can be withdrawn without tax.
The Roth IRA investments are highly recommended for those in their 20s because they tend to fit in the lower tax bracket than during the retirement age.
Consult a Financial Advisor
While in your 20s, you undoubtedly have little knowledge and experience in making investments. Therefore, to ensure that you make the right investment decisions and gain financial stability, consult with an experienced human, financial advisor.
A financial advisor will help you establish your goals, learn the market, and find the best brokerage accounts. They will also steer you in the right direction and ensure you reach your goals eventually.
Grow Your Savings
As you invest in your 20’s, save up money in a savings account. However, do not simply create an account and save only once; saving should be a regular habit. More so, increase the amount of money you save each month. Doing so will earn you enough savings so that you won’t be forced to take extreme saving measures when you retire.
Diversify Your Options
When investing, do not keep all your eggs in one basket; diversify your options. For example, if you choose to invest in stocks, compare the Motley Fool vs Morningstar services and use these to pick two or more stocks you can invest in. Diversifying your options ensures that you experience lower risks and achieve your financial goals smoothly.
The last thing you want is to grow old poor and have achieved none of your dreams. However, in your 20s, you still have ample time to create the life you have always dreamed of. Simply follow the above-suggested 7 tips for investing in your 20s and secure a happy future for yourself, both now and in the future!