Life-Changing: Best Investments You Should Do in Your 20s

The investment choices you make early on in your life and career could mean the difference between becoming wealthy and retiring early or remaining poor forever.

Making careful investments when you're young has the potential to make you incredibly wealthy throughout your life. Time is on your side and not taking advantage of those early years is a wasted opportunity.

How are you supposed to know which investments to make when the options can seem complex and overwhelming? In this article, CupsFinance.com will guide you on where you should invest your money, which will provide returns far exceeding what you could earn in the stock market, as well as ways to maximize your retirement savings.

Stick around until the end of the article because this could be all you need to retire extremely wealthy at a young age. 

First and foremost, you need to find a means of earning money that will help you reach further investment goals. 

Investing in a career should be the priority of any individual that hasn't already done so. How are you going to invest in assets if you're earning minimum wage and have nothing left after paying your bills?

At a minimum, you need to earn enough money to pay your bills and have something left over, even if it's not a lot to start. 

Investing in a career also means finding something you enjoy, at least enough that you'll be able to put the effort in, and something that you'd be content doing every working day.

Whether this is pursuing a career requiring higher education, starting your own business, or getting a job, think carefully about this choice.

Consistent earning over time is what will allow you to reach the next level and this won't happen if you're skipping around to different jobs, constantly trying new things, and not sticking with one.

You may gain some information from this article about The Top Most Promising Career Fields You Should Consider Invest in

You have to pay down debt or at least get it under control to the point where you have extra money left after paying your bills. If a large percentage of your income is going towards student loans, car loans, and other miscellaneous debts, there will be nothing left to invest.

Even more important is eliminating high-interest debt. Investing of all kinds has some amount of risk, but paying down debt doesn't.

When you invest in the stock market, there's a possibility of making money but there's also a chance of losing money. When you pay down debt with an interest rate of 10% you're guaranteed to save 10%.

It doesn't make sense to take on investment risk to earn a return of 10% if the interest rate on your debt is guaranteed near that amount.

The famous hedge fund manager, Peter Lynch, believes that buying a home is one of the best investments you can make, which says a lot coming from a professional stock picker. h

Homeownership is a great investment from the traditional point of view because you won't be paying your landlord's mortgage. But it can also provide an excellent return on your investment.

Let's say you purchase an average-priced home for $350,000 and put 5% down or $17,500. If the home appreciates 3% in the first year, that's a $10,500 increase, giving you a 60% return on your cash investment. Your mortgage balance is also decreasing with each payment you make.

Buying a home makes the most sense when the monthly costs are the same or lower than renting. So if leaping into homeownership means tripling your monthly housing costs, it's not such a good idea.

To take the idea of buying a home to another level and drastically increase your potential returns, consider buying a property that can generate some type of rental income.

First-time homeowners also can become Real Estate Investors by purchasing a duplex or a triplex. The rental income could cover all of the expenses associated with the home, including the mortgage.

By utilizing a first-time homebuyer program, only a small down payment is needed. This is an excellent move for anyone willing to take on the responsibility of becoming a landlord.

Because you not only receive a fantastic return on your down payment but your housing costs will also be covered.

Perhaps, the easiest way to get rich over time is by paying yourself first. This concept is nothing groundbreaking but it's worth repeating because if you don't do it, you're unlikely to invest at all. 

Every single week, month, or whenever you get paid, designate a percentage off the top for investing. Do this before paying bills, going shopping, or going out.

You could have lived a better lifestyle, buy nicer clothes, driven a better car, and taken more frequent trips, but that money saved will grow to incredible amounts over a couple of decades. 

Just a little bit of money set aside today could mean hundreds of thousands or millions of dollars by the time you reach retirement age. 

Investing 10% of your income is a great starting point and you can increase this percentage as you become better at earning and saving money. You have several high-quality options with the money to pay yourself.

If you have a 401k match from your employer, this is an opportunity to get the extra money that you otherwise wouldn't.

Matching contributions to a 401k is another guaranteed return on your investment.

Roth IRAs are another choice that you shouldn't ignore because the money you withdraw from a Roth account during retirement isn't subject to any income tax.

Contributing to a traditional IRA is a great option for reducing your taxable income. With this account, you receive a tax break during the year in which you contribute, but the money you withdraw during retirement is taxed at ordinary income tax rates.

A taxable brokerage account provides more flexibility than retirement accounts, but that flexibility means you'll be forfeiting tax breaks. Depending on your income and other factors, the tax savings will vary, but the main advantage of a taxable account is that you can withdraw the money at any time without penalty, just tax.

When you contribute to one of these accounts, you have to choose where the money gets invested so the cash doesn't sit idle losing value to inflation.

A common mistake is thinking that the money you contribute is automatically invested, but the 401K and IRA are just types of accounts, not investments.

You wouldn't want to put money into these accounts for 30 years, only to realize it was never invested and is practically worthless.

It's up to you to choose where the money within the account is invested. 

With a 401K, your employer will have a list of choices from which you can choose, such as an S&P500 Index Fund.

With an IRA you have a much larger selection of investments, which is a huge advantage to these accounts. You can choose any stock or fund. It's hard to go wrong with a low-cost S&P500 fund because it provides immediate diversification combined with growth instability.

For those with higher risk tolerance, a more aggressive growth fund such as an S&P500 growth fund is a desirable option providing a balance of risk and potential return.

Investing in an aggressive growth fund, like vanguard's VUG means more of your money will be invested into fast-growing companies like Amazon, Apple, and Home Depot.

A fund like this will be more volatile, meaning it will provide higher returns when the overall market trends upwards, but the returns will be worse than average when the overall market trends downwards.

Over a very long period, an aggressive growth fund will in theory provide better returns which are ideal for those with a long time horizon. Just a two percent difference in your annual rate of return will make a big difference over time.

However, you need to be prepared to withstand the volatility and you should understand the trade-off between risk and reward.

Investors love individual stocks because they provide incredible potential. It's possible for a single stock to 2x or 3x in a somewhat short amount of time. But the same happening with a fund holding hundreds of different stocks is highly unlikely.

There's nothing wrong with buying single stocks, as long as you restrict them to a small percentage of your portfolio. Experts recommend not putting any more than 10% to 20% of your portfolio into single stocks.

To limit your chances of losing money, stick to large stable Blue Chip companies. These are stocks like Walmart, Apple, Procter and Gamble, and Coca-Cola. They've been around for a long time and the chances of them going bankrupt overnight are very small.

Invest in companies of which you thoroughly understand the business model. meaning you know how they stack up to their competition and exactly how they earn money.

Instead of throwing money away that you'll never get back, learn where to invest your money as soon as possible. Just making a few small moves now, could make you a very wealthy individual when you reach retirement age so do not let this opportunity pass you by.

Wait! Before any investment made, you also need something important called as Emergency Funds: Click to Learn More