Investing in 20s: Investments play a significant role in deciding one’s lifestyle and future, and investing early is considered ideal. Hence, planning and implementing smart investment strategy in 20s would be a great idea, because one can invest more money with lesser responsibilities, and earn decent returns in the future. Investing in one’s 20s can help remain invested for a long-term which is another pro.
1. Learn the basics of personal finance
Investing requires one to know personal finance as it helps in managing the money efficiently. Different concepts like money management, saving, investing, banking, budgeting, mortgages, investments, insurance, retirement planning, and tax planning come under the umbrella of personal finance. It is necessary to have at least basic knowledge of these concepts before one starts to invest.
2. Choose your investment goal carefully
Investing with a goal in mind is the best thing to do. The goal can be anything as simple as buying a car, to making wealth for the future. One needs to understand that goals should be divided– short, medium and long-term goals. Segregating the goals and achieving it one-by-one helps in getting a clear idea of how much to invest and how much returns can be made.
3. Follow 50:30:20 rule
The basic rule which should be followed by every beginner is the 50:30:20 rule. According to this rule investors need to allocate 50 per cent of their money to meet requirements. For goals and desires, one should allocate 30 per cent of their income, while savings and investments should receive the remaining 20 per cent. As a result, one must carefully spend their money toward achieving their financial goals. Then, one can allocate money to the targets based on the investment period.
4. Diversify investment
Investors in their 20s should always make sure to diversify their portfolio and not just invest in equity instruments, but also balance it out by investing in debt instruments. This helps in being aligned with the market conditions. Also, investors should try and stay invested for the long term to yield good returns.
5. Reviewing and Realign
After all the above-mentioned things are taken into consideration, young investors should keep adapting to the market conditions and realign and review their portfolio to get the best returns. There can be scenarios where a investor can change the target/goal of his/her investment, in that case they must definitely review their portfolio and realign it with their new objectives.