Many young adults these days are in love with the idea of investment or saving for their retirement but do not really know where to start. If you’re one of them, keep in mind that your age is a crucial element in the type of investment you should make. There are investments that are short-term and long-term, depending on specific needs.
It’s vital to prioritize your investment goals. Take advantage of easy-to-access investment accounts or services from banks or financial institutions. Most of them are also affordable and convenient to manage, which is ideal if you want to take small steps first. This article will give you an idea about the four major investments that you can make in your 20s.
Retirement fund
If you’re young, focusing on your long-term savings should already be your major investment objective. People in their 20s will have about 40 years to accumulate their retirement savings. Nevertheless, it’s never too early to start your retirement savings.
Some of the available options are individual retirement accounts (IRAs) and corporate accounts such as 401(k), 457, and 403(b) plans. There are also traditional retirement accounts where you won’t have to pay for tax until you withdraw your funds.
If you’re currently employed, make sure to ask what your company offers. Just remember that you should aim to boost your purchasing power in your retirement savings over time. After all, you’ll need every single penny once you stop working.
Real estate property
Traditionally, buying a house is a great investment for anyone. But as a young adult, be sure to think it through first. Consider factors such as the current housing market, the duration of your residence, the personal financial situation, the rental prices, and, of course, the location you want for your retirement.
Consider all these factors first before you attempt to buy a house and land property. To make it worthwhile, choose the option that works for you. Do you want to invest directly by buying rental properties? Or do you want to take advantage of the opportunity in which you can commit a certain amount to begin investing?
You should also diversify your investments. While it may be more convenient to buy a property in your neighborhood, look into investing in other cities or states as well. The larger the pool of available investments, the better opportunities you have. This is also beneficial for protecting your portfolio against the local markets’ volatility.
Health savings account
A health savings account (HSA) is much like a personal savings account that you can use to pay qualified healthcare expenses. To be able to open one, you should be covered by a high-deductible health plan. But funds in your HSA will roll over from year to year, and anyone can deposit money in your account.
Money in your HSA can be used in other expenses, depending on the several matters or terms. However, if you use it solely for the qualified medical expenses, you will get tax-free withdrawals since this isn’t subject to federal or state taxes.
HSAs are more ideal for individuals who are generally healthy and just want to save for future medical expenses. While this can be a beneficial and attractive choice, make sure that it’s the right option based on your personal needs.
Mutual funds
Another option you have is to invest in mutual funds. This type of investment is popular for good reason. Mutual funds are widely available, are easy to buy and sell, and are designed to assist in achieving long-term financial goals, making them a great option for young investors such as yourself.
Here, you can expect diversification at every dollar level. When you invest in a mutual fund, it will be pooled with all the other investors’ money included in that fund. This will enable that fund to buy hundreds or thousands of various investments. At the same time, depending on the amount invested by the mutual fund shareholders, expenses will be shared proportionally.
Apart from its fair pricing and convenience, purchasing a mutual fund also gives you access to advanced portfolio management. Part of the expense ratio is designated for a management fee, which will be utilized to hire an experienced manager who buys and sells bonds and stocks.
There are multiple investment options that you can choose from. But as a young adult or investor, remember that the first thing you should prioritize is getting into the habit of saving. Save regularly, and educate yourself with the investment options available to you. The right ones will greatly depend on your time horizon and personal investment objections, so plan carefully.
