Young people are generally not considered to be financially savvy. This is because, at least for some, if not most, the 20s are considered the period for having fun, leading to paying little or no attention to personal finances, debts, and savings. It also doesn’t help that they get little or no investment advice.
With all that said, though, investing early in life can help set you up for a bright future and financial success. You can invest for retirement, build your savings for emergencies, pay student loan debt, and set yourself up for financial stability and security. There are many benefits one can gain by investing in their 20s.
Even knowing all the benefits early investing can provide, some may hit a roadblock simply due to their lack of financial knowledge. Unfortunately, financial literacy is usually a primary subject in high school or college. Hence, it is not uncommon to find an average young person without the faintest idea of asset classes, investment markets, and how to create long-term wealth by taking advantage of investment opportunities.
That’s why we’re here to help. This article will discuss some of the best assets to buy in your 20s to secure your financial freedom. Most of these are easy to begin, do not require complex financial decisions, and offer reasonable returns over a short period – less than five years in some cases.
So ready to start investing in your financial future? Let’s check out what assets to buy in your 20s that will help you maintain a steady cash flow and set you up for success!
Why Invest in Your 20s?
It could be argued that one of the best things one could do for their twilight years is to build wealth through excellent investment decisions while young, such as in your 20s. Starting early gives you a headstart. You will save more money, even generating investment earnings to offset student loan debts.
Furthermore, there’s the possibility that you might even be able to have money to handle unexpected expenses such as surgeries, road accidents, or even natural disasters such as a flood. Additionally, investing in your 20s means that you will eliminate mistakes and false starts early.
It is virtually impossible to create an impressive investment portfolio without making one or two mistakes. Mistakes are indispensable when faced with wealth-building opportunities. Thus, it is easier when young investors make all their mistakes early on and spend their adult lives looking for ways to save money instead of correcting mistakes or putting their personal finance in order.
Assets to Buy in Your 20s
You are on the right path if you look for the best assets to invest in during your 20s. However, you must remember that the best investments may not appear on the surface to be the most profitable. You can invest in all or several of these simultaneously (having a diversified portfolio) or choose to focus on one investment option.
Even though you should be interested in looking for ways to receive more money than you put in, you should also pay attention to long-term prospects. The best investments are the ones that keep steady over a period or offer risk-adjusted returns. So, let’s look at some top options for assets to buy in your 20s.
The Stock Market
The stock market is often the first port of call when you think of investing or gaining financial independence. It is a great option to consider if you are still starting.
In considering stock options, index funds are an excellent choice to consider. This is because of the possibility of growth and positive returns over a long period. You could compound the interest rates, usually higher than you’d find with other stock options.
It is, of course, true that the stock market is given to volatility. This is exacerbated by the uncertainties occasioned by the Coronavirus pandemic. However, you can rest easy knowing many index funds have shown a consistent 10% rise in the past years.
Past performance of the stock market should influence your decisions when choosing any. Besides that, since you are investing for the long term, it might not be out of place to expect the market to right itself.
While the stocks are at the top of most investing tips, it is also beneficial to invest in tax-deferred investment accounts. It is possible to make six figures yearly from tax-advantaged accounts than a taxable account.
Moving away from the stock market, try alternative investments. This refers to anything outside of stocks and bonds; so invest money in alternative investments and other tax-advantaged accounts. If done correctly, it reduces portfolio volatility.
Invest in Retirement Savings
Being intentional about your retirement savings gives you an edge because you start saving early. Furthermore, take advantage of the government’s tax cuts to incentivize those actively putting money into their retirement savings.
Options you could consider when looking for a retirement plan include the employer-sponsored retirement plan, also known as a 401(k) or a 403(b) plan. If this option is unavailable, you may want to consider Roth IRAs or traditional retirement accounts. Each is a tax-advantaged retirement account, which means you’ll get tax deferral on your retirement contributions, especially for traditional IRAs.
Invest in Real Estate/Real Estate Investment Trusts
Commercial real estate and residential real estate are two of the best assets you can invest in for a long period. The attraction of real estate is that it is easy to start up and maintain. In addition, you can invest in real estate regardless of the kind of money that you have, as you’ll be able to find an investment plan that suits you.
For instance, you can make an initial down payment in purchasing buildings and complete it later. Furthermore, real estate is not affected by the stock market. This relative stability benefits the investment as well as your savings account.
So, you can purchase several residential properties and rent them out. This way, you start your own business and receive a monthly payment. You can place some of the rental property money into emergency savings or in an account for your child’s college tuition. Ensure you keep the emergency savings separate.
Beyond mainstream real estate investment, you may also want to go into Real Estate Investment Trusts (REITs). The difference here is that you hold a portfolio of real estate. Instead of investing in one building (typically your own home in most cases), you own a certain percentage of interest in buildings.
The great thing about a Real Estate Investment Trust is that you simultaneously get diversification and returns on the different buildings. Furthermore, young adults will find it easier to invest in real estate trusts. You will not have to pay all of the money yourself.
You pool resources with others and earn interests proportional to your investment. This is why we always recommend investing in REITs.
Pay Your Debts
Paying your debts may not seem like a viable investment pathway. There is no ‘asset’ that you will be investing in. However, you must understand that student loans form a huge percentage of young people’s costs as they start in life.
Thus, if you deal with it from the start, you liberate yourself and get into a position to start creating wealth. Debts stop you from fully maximizing the investment experience even with a higher-paying job. When you commit to paying your debts, you also become eligible for interests that accrue.
Although you may think that you could invest and pay off your debts later, that might not work as smoothly as you’d think. Paying for living expenses could interfere with the process. Also, you may lack the discipline to stick the process out.
Consider Robo Advisors
Most investors who are starting are often unfamiliar or uncomfortable with investing directly by themselves. Considering how busy young people are, willing individuals may not even have the time to carry out thorough research and then invest afterward. If this is your situation, you could invest using Robo advisors.
A Robo advisor is an automated platform that helps you make investment choices. It helps pick out the assets with high-income predictability, investment returns, and yields. In addition, it could even help you set up your brokerage account. Afterward, it administers the account.
The biggest benefit of this process is that it is a stress-free process for investment. You need only fund the account, and it does the rest for you.
Tips for Choosing Assets to Buy in Your 20s
No one will give you loads of free money if you refuse to invest. However, before you embark on this journey, there are a couple of things you may want to get straightened out. Find below the tips and suggestions you may want to implement when choosing assets to buy in your 20s.
When starting, one mistake most people make is to plunge head-first into the process. You may be wasting all of your life savings if you choose to tow this path. Beyond considering the asset classes we discussed above, you also have to be sure that you thoroughly research each.
The specifics may differ from how we’ve painted things here. It is only upon careful perusal that you can confirm any investment path we suggested is a great fit for you.
There is no shortage of sources of information on investing. You will find a cache of information on YouTube. These days, there are YouTube videos explaining almost everything. If you have access to any personal finance blog, that could be a great repository of information.
Consider the Cost
What you’ll need to start investing varies from one process to another. You may not have much money to put into an investment account as a young person. Hence, it also makes it important for you to consider options within your reach.
If the cost of an investment is too high, then you may want to back out. For instance, your retirement plan contributions should not exceed what you can comfortably afford from month to month.
Here also, you should endeavor to create an emergency fund. If the investment does not go according to plan, this will be your backup. Investors can be unpredictable, so the expected returns may not show up. An emergency fund cushions the effects of any such losses.
Look Out for Opportunities
The way investing works, you have to constantly look for opportunities if you want to make the best returns. Unfortunately, most investors make the mistake of putting passion before opportunities. This is a grievous error. It is immaterial if you had a previous interest in any particular area.
You should scrap the former if you find out that your contemplated choice will not pay you as much as others. For instance, some investing platforms and assets come with perks and incentives you could explore. Even if they do not fall into your core niche areas, consider them as viable investment options as long as your life will be the better for it.
Summary: Assets to Buy in Your 20s
You are never too young to start making big moves. Being deliberate about wealth creation through investments should not be celebrated as something out of the ordinary. With the state of the world today, your life might be miserable a few years down the line if you are not focused on investing and saving. Starting early enables you to get in front of the horde, pay off student loans and finally have a blissful retirement.
So, if you’re ready to start investing in your 20s, you know what to do! The ideas and suggestions here are tested and trusted. If you stick to them and find the right assets to buy in your 20s, your future will be successful!