Millennials have faced many economic obstacles during their 20-something years, such as high student loan debt and a fluctuating stock market. Yet with time on their side and investing as an avenue towards reaching long-term financial goals, 20-somethings may be able to use investment to their advantage and meet long-term financial goals.
Step one in creating your savings plan should be setting a goal that can be kept and gradually increased over time.
1. Invest in Real Estate
Investment in property should not be taken lightly. Before considering becoming an owner or landlord, you’ll usually need to clear away debt and save some savings first.
Sethi suggests setting aside a portion of every paycheck towards savings or investments – just a small portion each time can help you benefit from dollar cost averaging and weather market fluctuations more easily.
Once you know your desired level of involvement in real estate investing, he advises determining how involved you want to be. Passive investing through REITs or funds could be less risky.
2. Invest in Stocks
One of the best ways to increase wealth is through investing in stocks. Regular investing can help build up your fortune over time, and diversifying investments helps minimize risk.
Millennials can take advantage of compound interest by beginning investing early, yet many find investing challenging due to low wages and rising student loans.
Investment in growth-oriented assets such as stocks and real estate is often beneficial, since they offer higher returns than more stable investments such as bonds. You can further diversify your holdings by diversifying across asset classes like large-cap and small-cap stocks, international stocks and bond funds.
3. Invest in Bonds
One of the easiest and most efficient ways to build wealth is investing in bonds. These debt investments offer returns by lending your money to various entities – such as Treasuries, Corporate bonds, Municipal bonds, Mortgage-backed and Asset-backed bonds.
Millennials should add bonds to their investment portfolios for long-term savings growth. Time is on their side and by starting early and developing consistent savings habits, compound interest will take its course and help millennials reach their financial goals in retirement and beyond. Contribution options could include an employer sponsored retirement plan or opening an independent brokerage account.
4. Invest in Mutual Funds
Graham Stephan provides straightforward money advice in his YouTube videos for millennials. He believes it’s possible to become wealthy in your 20s by monitoring credit, expanding work skills, creating multiple income streams, avoiding lifestyle inflation and investing aggressively at an early age.
He recommends investing in mutual funds via your workplace 401(k) or individual retirement account (IRA). This strategy helps diversify your portfolio and lowers risk from market declines.
He advises prioritizing paying down high-interest debt while investing a considerable portion of any raises, tax refunds, or windfall income received as savings or investments.
5. Invest in ETFs
Young adults in their 20s may not have much money saved up, but even investing a small amount each year could pay dividends over time due to compound interest.
ETFs (exchange-traded funds) provide an easy and cost-effective way of investing in the stock market. They track specific indexes, making investing simpler.
Focusing on assets instead of liabilities is the key to creating wealth. Assets include any tangible thing that appreciates over time or makes money passively for you – like real estate, stocks, bonds or websites; liabilities on the other hand include things that depreciate with time such as cars and furniture.
6. Invest in Other Assets
Diversifying your portfolio with alternative assets such as fix-and-flip properties or real estate investment trusts may help reduce risk. Saving in high-yield savings accounts or certificates of deposit may also prove valuable.
A 401(k) can be an excellent investment vehicle. Many employers provide match contributions, so take full advantage of them!
Investment in other assets such as real estate or mutual funds can help diversify your portfolio and reduce risk. Furthermore, investing in yourself by developing skills can also be advantageous as this will give you access to an expanded personal workforce which can generate extra profits over time.
