Where to Invest in Your 20s?: First, congratulate yourself because you think about Investing and Saving. This is the first step to achieve your goal of financial freedom. Many people don’t even have any idea about investing at the age of 40s.
Early you start investing, early you become financially free.
Warren buffet says:
If you are in late 18s or early 20s then this is best time to start investing.
Why Invest in your 20s?
1. You can save more
If you are in your 20s then you have fewer expenditures. You have less responsibility for your family. Some people do their job and live with their parents that’s why they have not to give any house rent and have fewer food expenses. That’s why you can save more in your 20s.
2. No one is dependent on you
Mostly at this age people are unmarried. Just started with their new job. In this scenario, you have fewer responsibilities. Not having more responsibilities. No one depends on you. And you can save more and invest more.
3. You can take more risk
In your 20 you can take more risk logically. You, everybody, know that market is very volatile. It goes up and down frequently. But if you analyze historical data you will know that market continuously going up in a longer period of time. You get more time to stay invested in the market, in that way you can achieve a good return from the market and achieve financial freedom.
4. Power of compounding.
Compounding is known as the 8th wonder of the world. So many great investors create huge wealth by using the power of investing. But compounding takes time so it is good to start investing as early as possible.
In this example you will completely understand “Why to invest in your 20s”
Case 1: Let us assume that you start investing from your 20s up to your 50s. For 13% expected return rate. Might you will get more than 13% I will further tell you Where to Invest in Your 20s? In this period there is a total of 30 years. Assume You invest 5000 Rs every month. The following figure will tell the value of the total investment after 30 years.
In this scenario, your total portfolio value becomes 2,21,03,234 Rs. And in that, you will become crorepati in your 50s hahaha. That’s the power of compounding and investing.
Case 2: You delayed investment for 10 years and you start investing in your 30s up to 50s. Then you have a total of 20 years to stay invested. Again assume the same expected return rate of 13%. Monthly investment of 5000 Rs. In this scenario, you will get the following returns.
In this scenario, your portfolio value becomes only 57,27,596 Rs. Now you can clearly compare your first case and second case. By investing early you can create a good decent of wealth.
Moral of the story: In the first case, your total value of portfolio becomes 2,21,03,234 Rs and in the second case your total value of portfolio becomes 57,27,596 Rs. Now the choice is yours when to start investing.
Now come to our main topic.
Where to Invest in Your 20s?
First I will suggest you invest in yourself. Learning how to invest in yourself will be the best decision you ever make in your life. That will now help you in the future but also as current pay-off as well.
Doing exercise daily or going to the gym can shape your personality better. Keep a habit of reading make you a smart investor. Successful investors like Warren Buffer and others read dally. That keeps you updated about your investment in your assets.
You can strengthen your current skills by learning and practicing more. You can improve yourself by learning new skills. Break your bad habits. Take a sufficient amount of sleep, drink more water take good food.
Create good habits. But if you want to achieve financial freedom then you have to invest your money in financial assets.
In this segment, we are going to understand where we can invest our money. Before that, we have to manage our risk. How to manage risk, let us see.
1. Keep emergency fund
An emergency fund is a fund that will help you in your emergency or your critical situation. You have to keep 6 or 12 times the fund of your monthly expenses. To survive for 6 or 12 critical months. In this buffer month, you can find another source of income.
2. Life insurance or Health insurance
You all know that life is unpredictable and uncertain. You can save yourself with proper life insurance and health insurance.
A) Invest in Index, Debt & Mutual funds
If you are new to investing then you can start your investment journey with a low-cost index fund. Index funds are funds where you invest your money directly in the stocks of the index of the respective country. If you have no time to analyze the market daily then an index fund will be a good option for you.
Continuously start investing funds in your index fund scheme every month. That will give a good compounded annual return.
If you want some more returns from the index fund then you can invest in a Mutual fund. But you have to be careful while choosing mutual funds.
If you want to save taxes then you can invest in Debt funds.
B) Direct stock Picking
While starting investing with an index fund you also start learning about stock picking for investment. If you are new to the market then you can start investing in bluechip stocks. Here is the list of the top 10 blue-chip stocks in India.
You have to learn to analyze stocks by using technical and fundamental analysis.
I am also in my 20s. Here I will give you good allocation with minimum risk.
If you are new to the market and don’t know how to self-pick stocks then you can follow this allocation. I consider 100 Units here.
1. Mutual funds/Index funds – 80 Units
- Index Funds – 50 Units
- Foreign Funds / ETFs / FoFs – 10 Units
- Debt Funds – 10 Units
- Gold / Gold ETF / Gold FoF – 10 Units
2. Stocks – 20 Units
If you belong to an aggressive investor. You have sufficient knowledge about the stock market then you can choose the following allocation.
1. Stocks – 70 Units
2. Mutual funds/Index funds -30 Units
- Index Funds – 15 Units
- Foreign Funds / ETFs / FoFs – 5 Units
- Debt Funds – 5 Units
- Gold / Gold ETF / Gold FoF – 5 Units
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Thank you! happy investing!