Imagine if you had the chance to start over again as an investor — this may not be the case, but at least you could share some wisdom garnered over the years. What are the best recommendations for new professionals in their twenties, and how would you guide them in the modern era?
1. Start Early
The worst way to grow your retirement fund is to start too late. The best investors don’t wait until they are “ready to invest.” Instead, they begin with a small percentage of their monthly income as soon as they start earning, and as their areas of expertise expand, they can allocate a larger share.
2. Marry Into Frugality
There are so many horror stories of significant others bankrupting their spouse, either through divorce or during the marriage. Finding the right life partner doesn’t just mean a person who shares your love of Star Wars; marrying someone who doesn’t share your investment goals will cost you in the long run.
3. Follow Your Instincts
There is a preponderance of “to the moon” rhetoric in investment chat groups, social media pages, and expert websites. Trying to ignore the noise while discovering the market for yourself is important unless you know people with a great track record. Nothing is wrong with being a “to the moon” type, but backing it up with receipts is another matter.
4. The Buffett Effect
While there are enough Warren Buffet quotes to fill a novel, many investment “gurus” pick the ones such as, “Be greedy when others are fearful and fearful when others are greedy.” However, they don’t quote Buffett’s habit of reading 100 pages of detailed annual reports daily. Buffett can only be greedy because he has studied when to act this way. There is no alternative for hard research.
5. Nothing is Guaranteed
Life isn’t fair, and that is what most adults told us growing up, but do we tell ourselves this enough in investing? Nothing hurts like a capital loss, but we must be ready to accept that the market is complicated — even Microsoft, Nike, and Apple don’t guarantee returns, so learning when to take a hit will build confidence for future investing.
6. You Only Die Once
There is a growing Gen-Z trend wherein people spend all kinds of money they don’t have because of their fear of missing out (FOMO). However, if you are serious about building a future, spending money you don’t have is possibly the worst thing you can do. While this ethos can be forgiven on occasion, paying for vacations or concerts on a 29% APR credit card not only stops you from investing that cash but also ensures that you will always be catching up.
7. Choose Assets Over Income
Working your way up to a great job is one thing, but spending beyond your means to support a status-based lifestyle is foolish. Wealth beats income, and the system is geared toward asset acquisition more than income. There is a reason capital gains taxes are lower than income and state taxes.
8. Learn About Stop Losses
A stop loss is a function you can use on your automated investment platform that monitors stock values, selling that stock at a certain price if it looks set to fall. For example, you might peg your stop losses at 95% trade value; once the stock falls below 95%, the platform will show this information, allowing you to sell that stock before the market drops too far.
9. Make a Plan
So many simple online tools and forums are available to help new investors — even understanding how compound interest works is a good start. Spending time learning about electronic trading funds, market timing, and diversification in your early twenties makes sense. This task gets harder as you grow older and when careers, children, and aging parents get in the way.
10. Treat Salary as Financial Fuel
Some experts tell us to start early, going for smaller gains as we learn the market, and while your twenties are a good time to experiment with investment methodologies, time in the market will always win. You will make the most of that sweet compound interest by building monthly investment habits based on salary percentages. A monthly salary investment deduction is like adding logs to a fire that must burn through a long, cold night.
