Adulting is hard. If you’re in your 20s, you might find yourself trying to juggle a number of financial responsibilities: Student loans, rent, medical bills, car payments, student loans, phone bills, student loans, utilities—and did we mention student loans?
Millennials have historically been accused of being lazy or making poor financial decisions, such as the famous suggestion that young people are wasting their money on “avocado toast.”
But according to data published by Bloomberg, many millennials and 20-somethings are struggling to cope with larger debts and financial obligations, which limits their investment opportunities.
We hear you. At GorillaTrades, we understand that it can be difficult to find strategies for investing in your 20s. But we also believe there are some clear strategies that you can take advantage of now.
In this post, we’ll cover 5 of the best investments to make in your 20s — while still leaving some room in the budget for avocado toast (sorry; couldn’t resist!).
Five Smart Investments for 20-Year-Olds
Adulting is hard, but investing in your 20s doesn’t have to be. If you’re wondering how to invest in your 20s, you might start with one of these options.
1. Take Advantage of Employer Benefits
If you have a full-time job, there’s a solid chance your employer already offers investment opportunities as part of your benefits. One of the most common is a 401(k).
What is a 401(k)? A 401(k) is a tax-advantaged retirement plan. You can contribute to this plan pre-tax, which means your retirement contributions are shielded from your regular income tax.
Some employers contribute to your 401(k) on your behalf, which is a great benefit. But employees can also commit a certain percentage of their own funds to a 401(k).
If you’re in your 20s, committing 3% to 5% of your paycheck can ensure that your retirement plan accumulates over time. Some companies will also match your contributions dollar-for-dollar, which can help you maximize your retirement savings early on.
The best part is that your company’s payroll department can have this money deducted from your regular paycheck, so there’s no chance you’ll miss it.
Employers may offer additional investment opportunities, such as mutual funds and stock options. These might be a good opportunity as well. We’ll cover some of these options below.
2. Take Responsible Risks
Are you investing in the stock market? If you’re like your peers, you’re probably not. In 2017, an article in Barrons observed that millennials are slow to invest in the stock market, with only 13% being willing to invest in stocks.
There are multiple reasons for this, and not all of them are financial. If you’re in your 20s, you grew up in an age of economic instability. The economic collapses of the early twenty-first century may very likely have colored your teen years, making you a bit wary of financial institutions.
But there’s good news. Many young adults are finding it easier than ever to make stock market investments through the use of apps and other online resources that let them make solid investment decisions with a swipe of the thumb.
If you’re in your 20s, you have the luxury of taking greater risks by putting more money in aggressive performing stocks. At your age, even if your stock picks perform poorly, you’ll have years ahead of you to help address any potential losses.
In 2020, Kiplingers highlighted 16 stocks that millennials are buying. These include:
- Wells Fargo
- Xpress Spa
- MGM Resorts
- Beyond Meat
- Genius Brands International
Not to brag about ourselves, but GorillaTrades also has plenty of resources that can help you research, purchase, and monitor investments in the stock market. If you play your cards right, the stock market can offer some of the best investments to make in your 20s.
3. Consider an ETF Over a Mutual Fund
Mutual funds and ETFs can both be smart investments for 20-year-olds, though recently ETFs have proven to offer an edge over mutual funds.
Wondering about the difference? In a mutual fund, you make your investments through a fund-management company that actively manages your portfolio to ensure that it performs well against a market index (like the S&P 500). Because your portfolio is managed by a trained professional, there’s less risk associated with this investment strategy, though you will typically pay more for the service.
An exchange-traded fund (ETF) bypasses the need for a fund manager. Trades are made between individual investors. ETFs can be traded multiple times a day, if need be, and when you take part in your ETF you have greater personal choice over what companies you invest in.
This can be optimal for many people that want to choose companies they believe in or companies that embrace ethical business practices. ETFs also tend to offer greater tax efficiency than mutual funds, since they usually generate fewer capital gain distributions.
For these reasons, an ETF can be a great option if you’re seeking to learn how to invest money in your 20s. If you’re still undecided, you might find it encouraging to know that ETFs require no minimum investment. If you want to spend $20 just to see how it works, you can easily invest without accepting a huge risk.
4. Save Over Time
Maybe this sounds obvious, but the best way to ensure you have money saved for the future is to simply save it.
When you’re in your 20s, find a way to factor a savings account into your overall budget. Determine what amount you feel comfortable squirreling away for the future and stick to your plan.
Some banking platforms even allow you to automatically transfer money to this savings account every month to ensure you stick to your plan.
The key here is to scale your savings plan with your age and life stage. Seek to increase this savings amount as you age and your life stage changes. If you have a spouse or partner, you may want to discuss your savings plan together to determine your shared goals, then make a mutual commitment to work toward this savings plan.
That doesn’t mean that you have to let your savings account sit there, of course. At the very least, you might consider putting your money into a CD to generate some interest.
Other banks may have other interest-generating account options that you can utilize to help your savings grow.
While banks aren’t necessarily the best tools for investment, 20-year-olds may appreciate having access to their savings to meet life’s changing circumstances.
5. Find Reliable Help
It’s quite possible that the reason you’re unsure of how to invest in your 20s is because no one ever showed you. High school might have taught you that the mitochondria is the powerhouse of the cell, but this information doesn’t seem to offer a clear-cut investment strategy.
Your first stop might actually be your closest. Your employer may have a human resources department that can offer you some preliminary guidance about your financial options, especially as they may relate to your benefits as an employee.
You may also consider finding a financial advisor. A financial advisor can help you to determine your financial goals, formulating a clear, achievable strategy for how to meet these goals.
The world of technology has unleashed a slew of investment tools that can be used for research and financial planning, too. Some of these tools also offer active management from a remote advisor that can provide guidance regarding stock market investments and other financial needs.
How Much Should I Save?
Many millennials are skeptical when it comes to Social Security, and experts are divided about what this could mean for the future. If you’re planning on living on more than what a Social Security check can provide, you’re going to want to start an investment strategy today.
But how much should I invest? This is a common question, and the advice is usually: “As much as you can!” According to data published by CNN, you should be investing 10% to 15% per year.
If that sounds daunting, start small. Set aside 5%, or even 2%, just to get yourself started. At the very least, you could be developing a sound financial habit that you can build on for the future.
Trust Gorilla Trades for Investment Guidance
As we observed, 20-somethings have been historically reluctant to invest in the stock market. At Gorilla Trades, we believe you can rise above this trend and maximize your investments with the right tools and the right investments. We can help with that.
Our subscribers enjoy a wide array of benefits, including stock picks, regular newsletters, a mobile app, and text message updates to help them monitor market performance.
If you’re wondering if Gorilla Trades subscription is worth the investment, take a look at our testimonials page to hear how our other clients have taken advantage of our benefits to invest more wisely.
Better yet, sign up for our free 30-day trial, so you can see for yourself what Gorilla Trades has to offer. After all, it’s your future. Isn’t it time you invest in it?