When it comes to investment, you’re always told to start young. Time is on your side, after all. But how do you exactly approach this matter? How can you invest in stocks if you don’t have a high income yet?
To help you navigate handling finances and investing in your 20s, here are some basic rules to follow:
Invest with a plan
As with any milestones in life, investing in your 20s require proper planning. This includes outlining your investment strategy, contribution frequency, risk tolerance, and portfolio goals. Read up on different options and strategies and find out which one works best for your current financial situation. Also, prepare for this plan to change as your risk tolerance and goals change. At this point, treat your portfolio as an angsty teenager who needs some space and time to grow. You have to be patient continuously raising it.
Diversify: Don’t let trends easily sway you
Diversify, diversify, diversify—that’s what experienced investors often advise young players in the game. Having a diversified investment portfolio that includes different asset classes can minimize risks as you work toward your long-term goals. One of the mistakes that 20-something investors make is concentrating on trendy investments, such as internet stocks and cryptocurrency. Conventional assets might sound boring, but they are a great foundation to work on; diversify with low-cost traditional assets.
Don’t feel pressured to go all-in
Time might be on your side, but don’t rush it. If you’ve never invested in a certain market before, ease into it. Instead of tying up all your investable assets into a single fund, consider investing a little each month to build up your portfolio. Keep in mind that your 20s is also the ideal time to clear your student loans, improve good credit score to get a first-time homebuyer loan, and enjoy your earnings in dates and travels. The bottom line here is to invest, but don’t feel pressured to go all in and forget other goals in life.
This can be the most straightforward rule in investing money in your 20s. After all, the typical thinking at this age is to wait because you still have decades before retirement, and you haven’t earned much yet. But the sooner you begin saving and investing, the sooner you can reach your financial goals. Remember, when you’re in your 30s or 40s, it can be harder to invest since you have more responsibilities, such as childcare, kids’ education, mortgage, home maintenance, and car loans.
If you don’t know where to start, the easiest entry point to investing is through your employer’s retirement plan. From there, you will be more equipped to explore the stock market and other investment options. Just make sure to only invest in something you understand, and don’t be afraid to ask for help or advice.
At this point in your life, your greatest asset is time. Make use of it to start learning various investment strategies, but never chase trends and don’t feel pressured to invest your earnings. Your 20s should be a good mix of preparing for your future without forgetting to live in the moment.