Investing in your 20s
The twenties are considered to be the golden period of life. It is the decade that witnesses several monumental life changes, one of them being financial freedom. It is something that instills a sense of independence and power among us. However, as Uncle Ben says, with great power, comes great responsibility! Having financial freedom is one thing but retaining it while leveraging the same is another, and both are equally significant. So, if you’re in your twenties or are soon going to be financially independent, you might as well look for avenues to maximize your finances by channelizing them into productive instruments. Yes, we are talking about investing in your 20s.
As much as it sounds like something which a professionally experienced person would get into, it is not as easy as it may seem to be. Hence, if you think you are ready to begin with your investment journey or would soon be, here are a few things to keep in mind:
- The first and foremost step to investing in your 20s and, in fact, any crucial decision-making is planning. Lay down your short and long-term financial goals unequivocally and define their respective priorities. Start investing when you do have a surplus to invest. Track your income and expenses and keep an emergency fund and certain savings aside before directing your money in investing. Hence, firstly, make ample provisions for your immediate and unanticipated expenses.
Mutual funds via SIP
- Indulging in a systematic investment plan can be a good starting point for beginners. If you are looking forward to investing in mutual funds in your 20s, you may do it this way to make it more disciplined and stable. This plan allows you to invest a predetermined amount at regular intervals, rather than a huge amount at once. So, this option can be exercised if you are willing to invest a little amount consistently.
- Investing in Real Estate Investment Trusts (REITs) is like leasing an apartment with several roommates so that you get to enjoy the benefits of the property while not paying the entire cost. REITs are comparatively less volatile and enable you to have a balanced and steady investment portfolio in your 20s. The gravity of risk and profitability of dividends, however, depends a great deal on the region, hence thorough prior research is recommended.
- A small amount made as a recurring deposit, every now and then, can give you astounding returns in the future. More so, if you have the option of opening a recurring deposit account in a post office, then you might as well exercise it as it has sovereign security, being under the aegis of the government. You can choose to open a recurring deposit account every year, say on your birthday, and channelize an amount of your pay to these accounts as the investment will eventually be neutralized by the increase in pay year over year. This can prove to be a beneficial investment in your 20s.
- Gold is a limited resource just like land; therefore, it makes a great avenue for investment. As seen historically, its rate has almost always increased with temporary downfalls. However, it goes up in the long run, and hence, a proportion of your money can be invested in it. There are different ways of investing in gold and considering the expenses of buying it in the physical form and renting a locker for its security, you can also invest in gold via Equity Traded Funds or ETFs. So, considering your convenience, you can choose the appropriate form of gold investment in your 20s.
Stock market investing
- Although investing in the stock market is extremely common-place, for beginner investors in their twenties, it might not be the most desirable option to exercise, given the volatility of the stock market. However, if you keep a corpus aside for this very purpose, you can fish in the troubled water, i.e., at the time of a dip. This can prove to be a less risky option for a newcomer.
- Having a diversified investment portfolio is recommended for an investor in their 20s as this would not only provide a more stable and viable option for them but will also enable them to see what works the best. Hence, choose an investment vehicle that best suits your interests after carefully analyzing the risks associated with each. Although one's 20s is considered to be the age when risk is welcomed, one should actually be prudent while being ambitious.
There is no auspicious time to begin investing, you make up your mind and invest according to your resources and needs. You might want to invest in instruments that provide safe and consistent returns, given your newfound financial freedom. You do not have to be a market expert, but if you are getting into it, you are expected to study the market and know a thing or two about it, so as to maximize returns and minimize losses. And, this expectation comes from yourself only. Look at what mistakes others have made and what led to their success and learn from their experiences while making the most out of your experience.
Be prudent with your money but also have fun. Don’t direct your life to retirement, live every day while keeping an eye out for your future. Contribute consistently, while not compromising the quality of your life!
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Frequently asked questions
1. Why should you start investing in your 20s?
- One should start investing in the 20s as these are the years when we usually start earning a steady income, and therefore, channelizing the money in a prudent manner from the beginning is wise and can have fruitful returns in the long run.
2. Where should I invest in my 20s?
- There are various avenues to invest in when you’re in your 20s. Given the low-risk absorption capacity and limited corpus to invest, the investments can be recurring deposits, ETFs, debt funds, etc.
3. What is the best age to begin investing?
- There is no fixed age range to start investing in. You start investing when you consider yourself to be financially ready. Usually, it is in their 20s that people start earning a consistent income, therefore, starting to invest in the 20s can be a good idea if you’re ready.
4. What is the key to successful investing in the 20s?
- Successful investing entails various factors such as diversification of investment portfolio, investing in the long-term, doing thorough market research in order to understand the trend and the characteristics of the instruments, and seeking the right advice.
5. When should a person start investing?
- A person should start investing when they feel they are financially ready for it. This is when the person, inter alia, has an emergency fund established and has their long term-financial goals laid out.