How to Invest in Your Twenties

by Laura Latzko

It can be difficult to think about investing money when you are in your 20s because you are worrying about making enough money to pay for expenses. But it's never too early to start saving for your retirement years. Making investments now can allow you to start to build up money for the future. Because you have a long time horizon before your retirement, now is the best time to invest for growth.

Budget your money and save so that you are able to start investing when you are in your 20s. Reduce luxury expenses, such as eating out at restaurants, and budget so that you are able to pay for bills and necessity items while also saving money. Put money away in a savings account or a savings bond, which will accumulate a certain amount of interest.

Start an investment portfolio, and include investments such as stocks and mutual funds. Because you are young and have a long time before your retirement, you can afford to focus on growth-oriented investments. These investments have the ability to deliver robust returns, however, they also come with more risk. But when investing in your 20s, you can afford to take on more risk than older investors who are closer to retirement age,

Invest in a 401k account or an individual retirement account (IRA) through your workplace. Through an IRA, you are able to put money away on a regular basis for retirement into an account that will accumulate interest. Through a 401k, you are able to make investments in different stocks, bonds, mutual funds and other types of investments. At this age it's important to sock away as much as you can. If you have a 401k plan where your employer matches a portion of your contributions, you should contribute as much as you are allowed to, or as much as you can afford to. Gradually increase the percentage of your income that you put in your 401k or IRA as you get promotions or raises.

Make an investment in a house or a business after securing a loan to help you get started. Develop a good credit rating by paying bills on time so that you are able to secure a loan or mortgage. Keep your property and house in good condition, maintaining it and making repairs as necessary so its worth will continue to increase over time.

Warnings

  • Don’t expect to get a return on your investments quickly. Gradually increasing the amount of money you put in certain stocks can guarantee that you will get a better return if stocks do well, but you need to be prepared for the value of some stocks to drop.
  • Do not dip into your 401k account before you reach 59 and one-half years old. You will have to pay penalties or pay back the amount of money you borrowed with interest, unless you meet certain requirements for an exception.

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