What should I invest in during my 20s?
You’ve probably heard of the stock market or investing, but are you sure where to start? In this article, we’ll talk about the best ways to invest in your 20s, from stocks to mutual funds, and the pros and cons of each strategy.
1. Start investing now
Investing at any stage of life is extremely important, yet many people make the mistake of putting off their investments until the last minute. If you do not start saving right away, you may miss out on some big opportunities. In order to keep yourself financially secure, it is best to put aside 10% of your income each month, and invest regularly throughout your life.
2. Open a Roth IRA account
Roth IRAs are great because they allow you to invest money tax-free. You have complete control over how much you contribute and what types of investment vehicles you use.
3. Buy index mutual funds
Index mutual funds track the performance of a specific market sector, like technology stocks, and therefore tend to outperform traditional funds that focus on a broad range of securities.
4. Buy ETFs
An exchange-traded fund (ETF) is a type of mutual fund that invests in a basket of different assets such as stocks, bonds, commodities, currencies, and even gold.
5. Diversify your assets
Diversification is the practice of spreading your investments across various asset classes such as stocks, bonds and cash. By doing so, you reduce your risk by making sure your losses won’t wipe you out completely.
6. Build a rainy day fund
Rainy day funds are accounts set up specifically to deal with financial emergencies. A good rule of thumb is to save three months of salary to cover emergency expenses.
7. Pay off student loans early
Student loan debt is never fun to deal with, but paying it off early can help you build wealth faster. Student loans generally carry higher interest rates than credit card bills and car payments, but if you pay them off early, you can lower monthly payments and increase your savings rate.
How much should I invest in my 20s?
A recent study found that millennials (people born between 1980 and 2000) are saving less than they did during their parents’ generation. The average millennial has only $1,600 saved for retirement.
There are three main ways to save: investing, budgeting, and compounding interest. If you’re new to investing, start slow.
Are you ready to retire at 40?
Or maybe even earlier? Is investing in stocks a good way to prepare for retirement? Are you better off buying real estate or staying put in the stock market?
Investing in real estate has its pros and cons. While you don’t have to pay property taxes if you live in rent-to-own properties, you have to deal with higher maintenance costs, potential eviction, and possible foreclosure. On the other hand, you get paid interest and appreciation for your investment.
You want to invest in something safe that’s not going to collapse anytime soon, and nothing beats the safety and liquidity of U.S. government bonds. And you should focus on dividend-paying stocks because they give you steady income streams over time.