The view on investing has gradually moved from being a choice to being the answer, especially for young people. Today, life and finance coaches advocate investing as a life skill and a way to become financially free. People are faced with ads and promotions about investment programs. Still, it is even more difficult for people in their 20s to choose an investment, partly because of the information density and the entry barrier. This article explores the best ways to invest in your 20s.
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Why Should You Invest?
As a young person, building your finances from your 20s is possibly the best choice you will make, given global economic conditions. Who knows, you could end up being a professional trader. You can invest across financial markets through the Tradingview platform or in other industries that can multiply your capital gradually.
Before investing in any market, industry, or venture, you must understand why you are investing. Defining the purpose will help you set goals, create an effective investment plan, and manage the inevitable periods of drawdowns. Although the general goal of investment is to make money, many people have different ideas for investing. For example, some market researchers may invest in a market not to make profits but to learn how it works and retrieve specific information from the market.
As a young person, you should invest for three main reasons:
- To learn and practice good financial habits.
- To make money and gradually build your finances.
- To learn how money and investment work, increase your knowledge about finance generally.
Now, what are the best investments for you?
Best ways to invest in your 20s
Financial trading
Trading the financial markets is one of the easiest and most rewarding investments you can engage in as a young person. Many markets exist, such as forex, cryptocurrency, stock, options, Exchange-traded funds (ETFs), mutual funds, and commodities. The entry barrier is quite low; you only need to learn trading as a skill and start with a small capital. The best thing is that your trading skills apply to all markets; you may only adapt to the market you prefer.
Financial trading is a skill that will reward you in your 20s, helping you earn little profits over time as you build your finances. You’ll also learn a lot about how money and the economy work and become more disciplined and a calculated risk-taker, skills you will need to become wealthy. You can start learning trading today using free online resources and practice to hone your trading skills.
Real estate
Is real estate a great option to invest in your 20s? Yes. There is no “perfect time” for real estate investments; start whenever possible, as there will always be investment opportunities. There are different ways to invest in real estate:
- Real estate flipping is buying a property and increasing its market value through renovation and upgrades to sell higher and make profits.
- Commissions: you can get commissions by investing your marketing skills to sell real estate.
- Funding projects: you can take out loans to fund real estate projects (if you have the means) or pool funds to crowdfund a project and earn rewards.
- Real Estate Investment Trust (REIT): You can trade real estate stocks via online marketplaces without owning any real estate property.
- Real Estate Investment Groups (REIGs): You can invest in REIGs to earn passive income from rentals without the stress of maintaining or running the properties.
There is a relatively low entry barrier to real estate investments. Find out what works for you and go all in.
Retirement account
Getting a job in your 20s provides a springboard to start investing in your future. Investing in a retirement account is the best way. Whether or not you work, you can open a retirement account with a finance provider and start saving toward retirement. If you work, you can access a retirement account such as a UK workplace pension and the SIPP (self-invested personal pension) or, if you’re in the US, a 401(k) Plan, 403(b) Plan, Traditional IRA, and Roth IRA.
Research the advantages of each account and choose the one that suits you best. Start saving early, and set SMART goals. For example, you can aim to save 1x your annual savings by age 32. Speak to professional financial advisors and learn all you can learn about retirement investments. You may be in your 20s, but that’s the advantage you have to build your finances over the next few decades to enjoy your retirement.
Fixed income
Fixed income refers to a class of assets that pay out fixed dividends or interests to investors. Examples are Treasury bills (T-bills), Treasury notes (T-notes), Treasury bonds (T-bonds), A municipal bond, and A certificate of deposit (CD). These securities are typically government-backed and safe from financial risks. Start with fixed-income investments in your 20s to build financial discipline and grow your income. Government-backed securities are probably best as they are guaranteed and offer higher protection from volatility.
Tips on investing in your 20s
- Start small: Set aside a percentage of your monthly income for investment. Start with low figures such as £10, £50, and £100.
- Consult professionals: Never make decisions based on your emotions. Consult professionals and study markets before investing. Make only data-driven decisions.
- Choose the right investment broker: Choosing the right broker increases your chances of making money in your 20s. Choose a trustworthy, honest broker with little to no fees or commissions and a user-friendly platform.
- Diversify your portfolio: All investments come with significant risk. Diversifying your portfolio to minimize your exposure to market volatility and take advantage of trading opportunities is best.
You can successfully build your finances from your 20s. Prioritize financial trading education to develop and hone skills to navigate financial markets, and you will become successful at trading.