Investing in your 20s – Important Questions Answered

15 Apr 2020


They say that you are young, wild and free, especially in your 20’s, which is the ideal fantasy for any older investor! Your 20’s is a great time for you to begin investing and to multiply all the extra money you may have to spare. Investing in your youth gives you enough time to take risks, attempt to grow your funds, and recover from any losses if any, without too much financial damage or stress.

We’ve put together a few questions you may commonly have in regards to investing in your 20’s:

  • What’s the best age to start investing?
  • Should I take a lot of risks because I am young?
  • Should I pay my debts first or invest first?
  • Do I invest by myself or through a financial advisor?
  • How long will it take to see investment results?
  • What are the tips you’d give a first-time investor?

What’s the best age to start investing?

The answer to this is extremely simple, the best age to start investing in the stock market is now (Of course, as long as you are 18 years and above). But a more ideal scenario will be when the following are fulfilled:

  • All your immediate and pending high-interest debts have been paid off, or if there is a secure source of funds to pay them off.
  • You have created an emergency fund, wherein you have about three months’ basic income saved up, for any emergency situations that may arise unexpectedly.
  • Keeping these in mind, go ahead and invest regardless of whether you are 20, 35, 45 or 60!

Should I take a lot of risks because I’m young? 

It is true that you have time on your side as a young investor, and it is beneficial to be friends with risk. When you invest in your 20’s, take into consideration your financial foundations – your emergency funds, your source of income, your immediate debts, etc.

Once those boxes are checked, take all the risks you are willing to take when you invest. Also, it is important to keep in mind the goal. Assess if you are investing for a long term or short term benefit and invest accordingly. Investing young usually translates to investing more in stocks and a little in bonds. You may bear more risk from the stocks but with equal and high chance of gains and losses, while you will get steady returns from the bonds. Mutual funds are also a good way to go forward when you invest in your 20’s as you will be guided by a fund manager, and the risk is spread out between a range of different kinds of investments.

Should I pay my debts first or invest?

Even in your 20’s, credit cards and student loans often leave us all with some kind of debt or the other. So the decision on where to use your extra money shouldn’t be solely based on your age. In some cases, paying your debt needs to be prioritized over investing. Follow these simple steps before investing, to ensure you are making the right decision:

  • Always attempt to pay your debt on or before the deadline, as and when they arise.
  • Pay off high-cost debt first ( those with high-interest rates and penalties).
  • Build an emergency fund as a safety net for unforeseen circumstances.
  • Save for retirement.
  • Save for your other goals. (For example, you dream home, or a backpacking trip, etc.)

Whether you invest or pay your debts ultimately depends on what makes you feel more at ease.

Do I invest by myself or through a fund manager?

This would naturally depend on how much you personally know about investments. Investing is an art, it is always better to have some technical know-how’s about the market. You will also need to have knowledge on how to track the rise and fall of prices, the indexes and understand the role of the economy and its impact on the market, to make smart buys or sells. Thus, initially, it is advisable to invest with the help of a trusted agent. They will be able to guide you through it at a small cost until perhaps you understand how investing works.

Another good alternative to this is to invest in mutual funds. These are usually managed by fund managers and hence saves you the trouble, at the cost of a small percentage of your returns. Although you may earn slightly more by investing directly, it may be beneficial to have the assistance, especially in the early stages.

How long will it take to see my investment results?

We as humans always seek instant gratification, but it is important to understand that investing isn’t another instant gimmick. You may sometimes get some immediate gains, however, most times, you may have to wait in order to reap the fruits of your investment labor. You may expect your money to grow or multiply as soon as you begin investing, but it does not work that way. There is nothing like making a good long term investment, as the longer, you wait, the more you stand to gain!

However, if you begin investing in your 20’s, you have the benefit of time. You could make more gains with reduced risk. Thus, be patient, invest and watch your money grow and double or even triple with time!

What are the tips you’d give to a first-time investor? 

The ’20s is a great time for a beginner to start investing, but here are a few tips to keep in mind when you begin:

  • Research and learn as much as possible about investments.
  • Prepare to be patient and lose the ‘instant returns’ mentality.
  • Know your goals of investing ( assess your requirements).
  • Get guidance from a trusted source, understand their fee structure.
  • Begin small and try to diversify your investments.
  • Stay committed and think long term.
  • Do not give up in case you incur a loss, the market is highly variable and you have equal chance to make gains as well!

If you are interested in investing right now, here are a few articles from RoundUps to help you get started:

First, figure out what to do with your extra money –

Determine how much you should invest –

Four smart ways to invest for beginners –

Save & Invest Your Spare Change!

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