Best ways to invest in your 20s

Best ways to invest in your 20s

If you are in your 20s? And you want to invest your money. But Not sure how to invest your money.

This article will help you to invest your money.

In your 20s you may not have money. But one thing you have is your time.

You can use your time to build as a leverage to build wealth for you.

You can take advantage of the power of compounding, which works in favor of young individuals who start early.

Here are the things you can do in your 20s that can help you to invest your money.

1 Increase your income

You have time on your side. So the first thing you should do is to increase your income. Ones your income will grow you will have more money to invest.

You can start investing with a small amount of money. But the more money you have, the more return you will get.

You can increase your income by getting a high-income job.

You can also increase your income by developing high-income skills for you, which will pay you for your services.

If you have some skills like; Writing, coding. Logo making, digital marketing you can do freelancing to increase your income.

In your 20’s, do not stress more in getting more return on your investment, Instead, focus on “Investing In Yourself”.

Invest in yourself is the best investment you can do to yourself in your 20’s.

Invest in yourself

 You can invest in yourself by reading books, taking courses, learning new skills.

You can get free courses on these platforms:

Coursera

Edx

2 Learn to invest

In your 20’s you have enough time to learn anything.

“You can learn anything just by reading books and talking to people.” -Elon Musk

If you want to be a good investor than it is very important that you learn to invest.

Every investor you will meet is a self-made investor.

Investing is an art.

There is no college education that can teach you investing. Our education system is not designed for that.

Even in business school, you will not learn about investing.

You have to learn on your own.

In investing it is true that “ More you will learn, the more you will earn.”

Investing is all about business. And to be a good investor you have to understand businesses.

And to understand the business you have to learn to account.

Warren Buffet said:

“Accounting is the language of business.”

You can learn the basics of accounting by reading this book: Warren buffet accounting.

This is a simple book. This book will help you to read financial statements and basics principal of stock market investing.

There are basically 3 ways to invest your money. Of course, there are other ways to invest your money, but these three are the most popular.

These are:

1 Business

2 Stock Market

3 Real Estate

3 Invest in the stock market

In this article, I will talk about the stock market and how it is best among all.

I am saying others are bad investments, there are pros and cons of each investment.

Another investment like a business and Real estate requires large capital to start.

In the stock market, you can start with very little capital. You can start with any amount you have.

Stock market investments are best among all other investments.

History has proven that the stock market has made more millionaires and billionaires than any other investment.

You name any richest person in the world, directly or indirectly they have become rich by the stock market.

Read: How to invest in the stock market.

If you are interested in the stock market, you can open your Demat account with Zerodha.

Read: Best Demat and Trading account in India

There are many different ways to invest in the stock market.

You can invest in the stock market through mutual funds. This is best for those who do not have time to invest on their own. In a mutual funds, there are trained professionals, who will take care of your money.

You can invest in mutual fund in two ways:

1 SIP

SIP is a sys thematic investment plan. In SIP, you commit to paying a fixed amount of money every month to invest. Your money will deduct through your bank every month.

2 Lump-sum

In Lump-sum, you give a large amount of money at one time to your fund manager to invest.

But as you are young, it is best that you invest your own money.

You open a Demat account and start investing your money every month.

You can say that if someone is investing my money, why I bother to do research to invest.

You are right, but there are many flaws with Mutual funds.

It is said that most of the fund managers never beat the Index. There are very few good fund managers. It is very difficult to find a good mutual fund.

If you spend time finding good mutual funds, it is better that you spend time doing your own research to pick stocks.

An average mutual fund will charge you around 2-3% as their fee. It may seem very little to you. But if you do the calculation you can see the difference.

Assume the fee is 3%.

₹100,000   15%   30 Years   6,621,177.2  

₹100,000   12%   30 Years   2,995,992.2

You can see the difference. Just a 3 % fee can erase half of your wealth.

 Make smart decisions with your money.

Read: List of best stock market investing books

4 Learn the power of compounding

Albert Einstein Said

“Compounding is the Eight wonder of the world.”

Do you know why he said that?

We all learn about compound interest in school. It is 8th-grade math.

But we never know what compounding can really do to your life.

In every area of life compounding works. Compounding is exponential growth.

You start with little money and end up building wealth.

You can read: The compound Effect by Darren Hardy

How compounding works with money

Let’s say you are 25 years old now. And somehow you manage to save ₹6 lakh.

And you decided to invest that money for your retirement.

You invest your money in the stock market. the average return you can get between 20-25%.

We take 24% for calculation.

You will retire at the age of 60. That means you have 35 years.

Now let’s see the table.

YearsYour AgeYour Investment
1st 25₹ 744,200
2nd26₹ 922,560
3rd27₹ 1,143,974
4th28₹ 1,418,528
5th29₹ 1,758,975
6th30₹ 2,181,129
7th31₹ 2,704,600
8th32₹ 3,353,704
9th33₹ 4,158,592
10th34₹ 5,156,655
11th35₹ 6,394,252
12th36₹ 7,928,873
13th37₹ 9,831,821
14th38₹ 12,191,435
15th39₹ 15,117,379
16th40₹ 18,745,551
17th41₹ 23,244,483
18th42₹ 28,823,159
19th43₹ 35,740,717
20th44₹ 44,318,489
21st45₹ 54,954,927
22nd46₹ 68,144,110
23rd47₹ 84,498,696
24th48₹ 104,778,383
25th49₹ 129,925,195
26th50₹ 161,107,242
27th51₹ 199,772,980
28th52₹ 242,718,496
29th53₹ 307,170,935
30th54₹ 380,891,959
31st55₹ 472,306,030
32nd56₹ 585,659,477
33rd57₹ 729,217,751
34th58₹ 900,510,012
35th59₹ 1,116,632,415

You can see that you ₹ 6 lakh has become 100 Crore.

This is the power of compounding.

Final thought

In your 20s more focus should be on learnings. The more skills you have more sophisticated investors you will become and the more return you will get.

Always make your own financial decisions.

Always remember the power of compounding.

Shubham Pal

A student and an investor. Shubham has a passion for investing in the stock market. He loves to talk about investing, money, and the stock market. He is a follower of Warren Buffett. He loves to read personal finance and investing books.

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