Young adults often have the most potential for growth but the least amount of capital to invest. In fact, many young adults often struggle to make financial decisions mostly due to a lack of set financial goals especially within a consumption-focused economy. Investing in your 20s is a great way to not only make your money work for you but also for you to work towards your financial goals. Though it can seem intimidating at first, it’s usually not that complicated; the sooner you start, the better off your future self will be. So,as ayoung adult looking to eventually buy a car, house or go on experiential vacations, here are a few things to keep in mind.
Start Investing Early
If you want to give yourself a chance at reaching your financial goals, start saving early. The earlier you begin to save, the more time your money will have to grow and compound over time.
Start by setting up a savings account and depositing as much as possible into it every month. This can be difficult when first starting out, but setting up an automatic transfer from your checking account each month is one of the best ways to achieve this.
This also applies when choosing your retirement plan- YES! It is definitely not too early to start thinking about retirement. Make sure your retirement plan offers some low-risk growth potential overtime because you certainly don’t want the bulk of your money tied-up in investments that are only guaranteed not to lose money overtime. Reward is always the end game.
Make It A Habit
Making saving and investing a habit is the best way to make sure you’re getting your money out of your wallet and into the hands of someone who’s better at investing it. Put your money to work
Set up automatic deposits and automatic investments so that your money is safely invested. This will also help you avoid spending money on things like buying coffee each day, which may seem harmless but really, the costs add up over time.
Use Compound Interest to Your Advantage
Compound interest is the interest that accumulates on the initial principal of a deposit or investment. With compound interest, the interest earned gets added to your initial capital, which then earns more interest. This can be an effective investment strategy because you’ll earn more money than if you had invested in something with a lower rate of return.
Buy and Sell Stocks
There are two main ways to invest in stocks, bonds and mutual funds. You can either buy and hold or, buy and forget.
Buy-and-hold: you pick a few investments that you think will do well long-term, and then hold onto them until you are advised they’ve reached their full potential. For example, if you believe that oil companies are going to increase their stock prices over time because of demand for gas as transportation options shift from fossil fuels to electric cars, then it makes sense for an investor who isn’t looking for quick profit, but rather steady growth over time to invest in said oil companies’ stocks or bonds.
To make things even easier, there are mutual funds where these types of investments have been bundled up into one product that aligns with your values/goals/personality type etc; all you need is money!
Buy-and-forget: on the other hand, you can choose to buy specific items such as property or gold coins—these assets tend not only provide value but also return dividends yearly through rent payments (if applicable) or appreciation when sold in the future.These types of investments don’t require any upkeep either unlike stocks where one must monitor daily changes closely.
Assess Your Risk Level
It’s important to know how much risk is appropriate for you before making investment decisions that could affect your financial future. Some people are more comfortable with taking risks than others, based on factors like their current income level or their appetite for taking chances in general. It is important that you should take some time to learn about the world of investing before making major moves with your money. Once an investor knows what types of risks they’re willing to bear and how much time they want between now and when they’ll need access to their funds, they’re ready to start putting together a plan!
See a Financial Advisor
If you decide to invest, see a financial advisor. Financial advisors are trained to help you with your investments and figure out the best approach for reaching your goals. They can also help you understand the risks of investing and how to minimize them.
One of the most attractive things about investing while you’re young is that you don’t need a huge sum of money to start and also,you have a long time to make up for any mistakes. You also have the opportunity to earn interest on your investments and let them grow over decades, which makes it easier to take advantage of opportunities when they arise.
If you invest early, you will see positive results in the long run. All you have to do is just get started!