MoneyLife

How To Start Investing in Your 20s

By Marc Guberti
investing in 20s

Investing in your twenties is one of the best ways to grow wealth over time. By investing when you’re young, your portfolio will have time to compound until you retire. However, most people who start investing in their twenties don’t know all of the tips and tricks around investing. 

Many beginner investors fear that their inexperience will cost them because they’ll invest in poor-performing assets. But it’s never too early to invest in your future, and the only way to gain experience is to get started.

Why should you start investing when you’re young?

Young investors benefit from a lower cost of living than people in other age groups. More than half of all young investors live with their parents, which significantly reduces their monthly expenses. 

Without family-related expenses, your cost of living will be lower, meaning you’ll have more money to put towards your savings and investment accounts in your twenties. This money will help you cover your increased costs of living in the future if or when you decide to start a family of your own, all because investing early gives your money additional time to compound. 

How much money do you need to get started?

The more money you invest now, the more your portfolio will compound over time. Most people strive towards a lofty retirement goal, but you can start investing today for as little as a $1 bill. Plus, fractional shares can allow you to invest in any company, even if you can’t buy an entire share. 

Before fractional shares came to be, investors had to save money in order to buy the entire share. This accumulation of money became incredibly exhausting for stocks like Amazon, which costs over $3,000 per share at the time of writing.

Most first-time investors will start by micro-investing, which is when you add small amounts of money to an account that moderately grows each year. The practice of auto-investing can help your money grow via the stock market faster than it would in traditional savings account as well. Recent shifts have made investing more accessible to beginners who want to start investing early.

Do you need experience before you can start investing? 

You do not need any experience before you can start investing. In fact, the best way to gain experience is by investing! If you fear losing money, start by investing small amounts into companies that are known for being stable. 

These small investments will make you more comfortable with investing over time. As you become a more confident investor, you can consider investing in Bitcoin and other growth-oriented assets, which carry more significant potentials and risks.

An easy way to invest early is by setting up a MoneyLion investment account. These accounts come without any of those unfortunate and pesky management fees or trading fees. Plus, you won’t even owe any management fees on your MoneyLion investment account! 

Even better, you can get started in just a few minutes without having to agree to any minimums. These fully managed accounts also come without any management fees, and you do not need any experience with the stock market in order to open a MoneyLion investment account. Last but not least, a fully-managed MoneyLion investment account only costs $1 per month!

7 things to invest in your 20s successfully 

The investing world is vast. The modern investor can quickly choose from thousands of investment opportunities right from their computer. Plus, key data points on most assets are a few clicks away. 

MoneyLion portfolios invest in cost-efficient exchange-traded funds (ETFs) that are composed of a diversified set of stocks and bonds. Here are some assets you can invest in at an early age!

Stocks and ETFs

A stock is a form of security that represents equity, shares, or partial ownership of a company. Owning stock in a company grants you a proportional amount of assets and earnings within that company. 

You can diversify your portfolio by investing in multiple stocks. Portfolio diversification mitigates your risks in the event that one of the companies that you’ve invested in underperforms. Many young investors and college students invest in stocks due to the low cost of fractional shares. 

If you want to diversify your portfolio without researching and stock picking, load up on ETFs. An ETF, or an exchange-traded fund, is a basket of partial ownerships of hundreds or even thousands of securities. 

ETFs include partial ownerships in stocks, bonds, commodities, and other assets. Some ETFs only have one security type, like only offering stocks, while others include multiple security types, like a combination of stocks, bonds, and commodities all in one. 

Investing in an ETF can give you a broad array of investments, more so than what only one company’s stock could offer. You can trade ETFs just like you can trade stocks, but they come with heightened diversifications. Plus, an ETF’s success does not hinge on a single company.

Investors can trade stocks and ETFs on any given trading day. MoneyLion helps people invest early through its investment account, which gives investors access to personalized portfolios featuring ETFs built around your risk tolerance, preferred market sectors, and other factors. 

Mutual funds

Mutual funds form when enough investors contribute money and create pools together, which are intended to buy assets as a team, rather than investing on their own. The price of the mutual fund is known as the fund’s net asset value (NAV), which is determined by the portfolio’s total value divided by the number of shares held. 

Unlike stocks and ETFs, mutual funds typically trade once per day and settle after the market closes. This arrangement can make your money less liquid, but you will need to wait to receive your proceeds until the following day.

Professionally managed mutual funds usually come with higher fees than ETFs. As such, make sure you review the expense ratio of a mutual fund before you choose to invest in it.

Bonds

A bond is a type of investment where a lender loans money to a business or government entity for a specific period of time. Bonds have fewer risks than stocks and ETFs. 

Plus, if a company goes bankrupt, it must pay back the bondholders first. As such, stockholders get the short end of the stick in the event that a company they hold stock in goes bankrupt.

The low risk aspect of bonds also yields fewer advantages as well. Bonds rarely provide any meaningful gains other than cash flow, especially in terms of U.S. Treasury bonds. 

Corporate bonds, sovereign government bonds, and municipal bonds each carry different levels of risk and potential. If you don’t want to own bonds, you can invest in a mutual fund or ETF composed of bonds instead. 

Commodities

A commodity investment comprises natural resources that are sold and traded just like other assets. Commodity traders use the Chicago Board of Trade (CBOT) and New York Mercantile Exchange (NYMEX) to exchange grains, gold, metals, cattle, fruit, cotton, natural gases, and other commodities. 

Commodities present additional challenges for new investors due to the way they come in bulk, but a commodity’s ETF allows you to circumvent this challenge. You can also buy the physical commodity itself rather than trade time-sensitive derivatives.

Real Estate

Investing in real estate is packed with opportunities. You can invest in, manage, flip, and rent properties as a form of investing. Finding tenants for other investors or becoming a real estate agent are two other ways to invest in real estate. 

Rental investors can capitalize on platforms like Airbnb and VRBO to generate revenue from their properties. Taking care of tenants is risky, but it’s also highly profitable when done correctly. 

First-time homebuyer programs can lower your minimum down payment, making it feasible to conduct real estate investing in your twenties. Rental investors can choose between managing short-term vacation rentals or working with long-term tenants. 

Both scenarios present the same objective, which is to have tenants pay off your mortgage for you. As the property appreciates and you receive rental payments over a number of years, you can eventually end up owning a very valuable asset.

You can get into real estate investing right away with Real Estate Investment Trusts (REITs). These trusts are traded on the stock market, and they give you access to above-average dividends. Tax-related rules pertaining to REITs differ from qualified dividends since REITs are taxed at your ordinary-income rate rather than at a capital gains rate.

Cryptocurrency

Cryptocurrencies continue to gain momentum as an alternative form of currency. Some investors believe crypto-related assets, like Bitcoin, will replace global currencies, while others see this perspective as speculative. 

While investors have their own opinions about cryptocurrencies, it’s hard to question the meteoric rise of crypto, especially with the way Bitcoin has increased by over 300% within one year. Cryptocurrencies present a high risk, high reward investment. Keep this in mind when deciding how much of your portfolio to concentrate on Bitcoin. 

MoneyLion is working on a feature to help people like you buy and sell crypto, including Bitcoin and Ethereum. Make sure you join the MoneyLion crypto waitlist so that you can receive updates about MoneyLion’s upcoming Overtime feature as well. 

Auto-investing

Many young investors start with great intentions, but they don’t always remember to invest. If you put off the process of investing for too long, you can miss out on considerable long-term gains. 

With the auto-investing feature, you can automatically put a predetermined sum of money every month towards your investment portfolio. You’ll get to decide how these funds are utilized, and your portfolio will grow without any intentional effort on your part. 

A MoneyLion investment account can make it possible for you to enable the auto-investing feature. This auto-investing feature will allow you to set up recurring transfers from your bank account and to your MoneyLion investments. 

Automatically investing in ETFs will allow you to diversify your portfolio. Diversification lowers your risk because your money will be tied to numerous assets rather than a small number of assets. Setting up the auto-investing feature will allow you to focus on side hustles and invest an extra $1,000 all at once. 

Invest while you’re young by starting now 

Investing is a surefire way to build wealth over the years. The younger you are when you start investing, the more your portfolio will grow over time. If you need help, MoneyLion can make it easy for young investors to get started! With a MoneyLion investment account, you can build a customized portfolio with a few clicks.

MoneyLion will make it easy to adjust your portfolio based on your risk tolerance, desired assets, and other preferences. Get started by opening your MoneyLion investment account

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