A Beginner’s Guide to Investing in Your 20s

Starting investments in your 20s give a much-needed jumpstart to your financial goals such as house, car, and retirement. The compound returns help in developing a stable base for the future. Compound returns mean the returns that you earn on the investments and profits. Though investments come with a risk involved and there is always a chance you will lose a part of principal investment, but if you do it correctly the future you will thank you for investing early.

It is without a doubt overwhelming to start investments in your 20s. Everyone will have different opinions and if you ask someone where you should invest, they will give you different advice. Some may say that you need a lot of funds to start investing but that is not true. The investment options have changed and with the help of modern technology irrespective of your income, you can start investing.

Here are a few strategies that you can follow to start investing in your 20s

Decide your financial goals

The first step is to divide your financial goals into different sections. For example, the kmoney you are going to save for retirement should be in a separate section than that of savings for a down payment for your car or house. You have to make a promise to yourself that you are not going to touch your retirement money for 40 or more years. You can use apps like Grupeer to manage your financial goals. Also, there should be a section where you should keep the money for a rainy day.

Categorizing the accounts

Divide the savings into three categories as follows:

• Immediate: In the first category you should keep the money that you need on a day-to-day basis like groceries, bill payments, rent, gas and more.
• Mid-term: In this category keep the money that you will need in the next couple of years. Your emergency fund will come under this category. Also, wedding funds, travel fun, and down payments will come under this section. Consider this money for short term investments where you can get high-yielding returns in the short term. You can also opt for a fixed deposit with the bank.
• Long-term: This category will have savings that you are not going to touch for 20 years or more. You can opt for stocks, bonds, mutual funds, precious metals, and similar assets. Make sure to use multiple instruments of investments rather than putting all your money in one place.

Type of investment instruments

• Bank saving accounts: It is the most common and low-return mode of investment. The best part about bank saving accounts is that you can withdraw your money at any time.
• Fixed deposit accounts: You can invest with the bank for a longer term with fixed deposit accounts. In this case, your money will stay with the bank for a fixed period say 6 months or 1 year and the bank will pay you a higher rate of interest.
• Stocks: It is a small piece of share in a public company. When you invest in a stock, the profit that the company gains via capital appreciation or through dividends is divided among the shareholders. The longer the period you spend in the stock market, the better the returns you can expect.
• Bonds: It is a type of investment in which you give money to a company or the government for a fixed period. The borrower pays you interest against the investment.
• Mutual funds: These are managed funds that invest in multiple instruments for a fixed period. You can invest in mutual funds in a lump sum or every month.
• Precious metals: Metals like gold and silver are good options for long term investment. As these are globally accepted, you can expect the returns to be gracious over the years.

Starting investments early is essential to make your future financially secure. For someone who has just started earning, there are countless options available in the market. You can start with small investments and as your income increases, you can invest more. You should review your investments every year and modify your goals accordingly.