5 Reasons Why You Should Start Investing In Your 20s

Investing at a young age has its perks, from the potential of greater returns to better financial security later in life. But with so many investing options out there, it can be hard to know where to start. In this article, we’ll explore why investing now is important and how you can make smart investments for a more secure future.

The Investment Process

Investing in your twenties can be one of the smartest things you do for your future. By start investing early, you’ll have a longer timeframe to ride out market volatility and compounding will work in your favor. Investing also forces you to think about your goals and develop a plan to achieve them.

But where do you start? The investment process can seem daunting, but it doesn’t have to be. Here are the basics:

1. The Investment Process

2. Figure Out Your Goals

3. Decide How Much Risk You’re Comfortable With

4. Choose an Investment Strategy

5. Pick the Right Accounts

6. Start Investing!

Why you should Invest Early?

The earlier you start investing, the more time your money has to grow. Even if you don’t have a lot of money to invest, starting early can make a big difference over time.

Compound interest is one of the most powerful forces in investing. It refers to the ability of an asset to earn returns not only on the original investment, but also on the accumulated earnings from previous periods. This means that the longer you hold an investment, the greater its potential return.

Investing early gives you a major advantage in compounding because it allows your investments more time to grow. For example, let’s say you invest $1,000 at age 25 and earn an annual return of 8%. After 10 years, your investment will be worth $2,135. If you wait until age 35 to start investing, you’ll need to earn a return of 12% just to end up with the same amount of money after 10 years.

Investing early also allows you to take more risk and potentially earn higher returns. This is because you have more time to recover from any short-term losses.

Lastly, starting early gives you a head start on building wealth. The sooner you start investing, the sooner your money starts working for you and growing on its own. This can have a major impact down the road as compound interest really starts to work its magic.

Investments that are a good fit for 20s

When you’re in your 20s, you have time on your side. You can afford to take more risks with your investments, since you have time to recover from any potential losses. Here are a few investment ideas that may be a good fit for you:

1. Growth stocks. These are stocks of companies that are expected to experience high growth rates in the future. They tend to be more volatile than other types of stocks, but they also offer the potential for higher returns.

2. Small-cap stocks. These are stocks of smaller companies that tend to be less well known than large-cap companies. They offer the potential for higher returns, but they also come with more risk.

3. International stocks. If you’re looking to diversify your portfolio, investing in international stocks is a good way to do it. These stocks come with additional risks, such as currency fluctuations, but they can also provide the opportunity for higher returns.

4. Index funds and ETFs. These are mutual funds or exchange-traded funds that track a particular index, such as the S&P 500 or Dow Jones Industrial Average. They offer diversification and professional management at a relatively low cost.

5. Real estate investment trusts (REITs). REITs invest in income-producing real estate, such as office buildings, shopping malls, or apartments. They offer the potential for high dividends and capital appreciation over time

Investments to avoid at an early age

There are certain investments that are best avoided at an early age. These include:

1. High-risk investments: Early investors should avoid putting their money into high-risk ventures, such as penny stocks or cryptocurrency. While these types of investments can offer the potential for high returns, they also come with a high degree of risk.

2. Investments with high fees: Another type of investment to avoid at an early age are those that come with high fees, such as mutual funds with high expense ratios. While these fees may not seem like much when you’re starting out, they can eat into your returns over time.

3. Complex investments: Complex investment products, such as derivatives or hedge funds, are also best avoided by early investors. These products can be difficult to understand and come with a number of risks that inexperienced investors may not be aware of.

What if I can’t find a job after going to college?

There are a few things you can do if you can’t find a job after going to college. You can start by looking for jobs that are in your field of study. If you’re having trouble finding a job in your field, you can try expanding your search to include other areas. You can also look for part-time or full-time work, internships, or volunteer opportunities. You can also try networking with people who work in your desired field. Another option is to start your own business. This may require some investment on your part, but it could be a great way to make money and gain experience in your desired field. Whatever you decide to do, don’t give up! There are plenty of opportunities out there, you just have to find the right one for you.

Conclusion

Investing in your 20s is one of the best things you can do for yourself and your future. Even if you don’t have a lot of money to invest, getting started now will pay off in the long run. With compounding interest, tax breaks and other benefits, investing early can be incredibly rewarding. So make sure you take this advice and start investing now so that you can reap all the rewards later on down the line!