4 Smart Investment Moves to Make in Your 20s

Today’s post comes from Mari as she writes on the topic of investing. I like this post since it offers a few options I’m not 100% familiar with, such as real estate investing. Anyway, share your comments below after reading and we can see which methods have worked for others in the past.

Mari writes for Loansolutions to help educate people in making informed-decisions on taking out loans and becoming responsible borrowers. Being the COO, she feels it is her social responsibility to do so. Learn more from her as she shares tips, advises and stories on finance. Also, she’s fond of 9GAG, so you might read some random stuff over here.

4 Smart Investment Moves to Make in Your 20s

“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” — Robert Kiyosaki

Scary, overwhelming, and challenging. These are three words that instantly come to mind when talking about investing. Although investing can be scary, overwhelming, and challenging all at the same time, when you do some thorough research and learn to master investing tips, your chances of having long-term success are great.

So if you want to have a financially secure future, then start investing your money when you are in your twenties. Below are four of the most profitable ways and the safest investment moves that you can try to multiply your assets and ensure a financially secure future.

1. Invest in Peer-to- Peer Lending

Peer-to- Peer lending is one of the safest investment methods that you can try because it spreads out your investment to many borrowers. Rather than placing all your investment funds into one borrower, you lend your money to “peers” or other people through companies, such as Lending Club, Prosper and Perform. The borrowers will then pay back the loans with various interest rates. With this type of investment method, your money is spread out to compensate for any borrowers who fail to make loan repayment.

2. Purchase Bonds

First time investors should try investing in bonds. Bonds are debt investments wherein the investor loans money to a corporate entity or government organization at fixed interest rates for an established period of time. The price of the bond is equal to the amount of investment lent to the company or organization, and the investors receive interest in exchange for lending the money.

3. Go into Real Estate

Investing in real estate can produce a substantial income either through capital appreciation, renting, and buying and selling. This makes it one of the most in demand investment methods that you can try to make big profits. Because it involves physical assets, this investment strategy will be very profitable as long as businesses need buildings to manufacture goods and host customers and products, and people need homes.

4. Buy Precious Metals Like Gold

Precious metals, such as gold, are valuable assets. You might think that investing in gold is already outdated, but it still holds real value and remains to be a worthy investment if you handle it correctly. One of the advantages of investing in gold is that it preserves wealth. You can buy these precious metals and keep them at home or store them in a safe place. In an event where the economy collapses, these assets can be used as barter.

Bottom Line

You may think that you need to have millions of dollars in your bank account before you can start investing, but think again. With as little as fifty dollars, you can put your money into some investment methods that will increase over time. By trying out these investment strategies, I hope that you’ve learn some important ways to save up your hard earned cash and make your future financially secure.

Check out more of Mari’s work via this link.

14 comments… add one
  • Jon @ Be Net Worthy Oct 5, 2016, 5:42 am

    Hmmmm, interesting recommendations for people in their 20’s. Bonds? Precious metals? I wouldn’t classify these as “smart” moves and certainly wouldn’t recommend them to anyone I knew in that age bracket.

    I would recommend total stock market index funds, p2p lending could be good and certainly investment real estate can build significant wealth over time. I’d discourage people from precious metals until they have a substantial portfolio and even then to keep it to a low allocation. You don’t need bonds until you are much older.

    Just my two cents.

    • ADI Oct 5, 2016, 5:53 am

      I tend to agree with Jon. If i had a chance to go back and talk to myself in my twenties I’d stress the importance of time in the market with assets like equities and real estate. The long term effects of compounding in those assets would have put me in an excellent financial position.

      I’m not sure the same could be said for an investment in precious metals!

    • FinanceSuperhero Oct 5, 2016, 8:20 am

      I agree, Jon. I would feel hard-pressed to recommend bonds to even my most conservative friends who are in their 20s. I would actively discourage anyone from investing in precious metals at virtually any stage of the game. Real estate can be a wise investment if it is done wisely.

  • Distilled Dollar Oct 5, 2016, 5:55 am

    I’m a fan of real estate only because I’ve heard so many success stories. My one concern is how much survivorship bias plays a role in this aka the stories of real estate investors who go broke are rarely told.

    After reading Bogle’s book Common Sense on Mutual Funds, I’ve basically agreed to go the index route as long as I’m working full time. Perhaps some investment opportunities, such as peer-to-peer lending should be looked at again, but I think I’m a bit skeptical at this stage.

    I do agree in the long run, peer-to-peer lending seems like a great option. From a trends perspective, I view it as a more efficient way to allocate capital to the right people than the current method being utilized by large banks.

    Thanks again for the post!

    • PatientWealthBuilder Oct 5, 2016, 9:22 pm

      My opinion: Open a brokerage account online and invest in index ETFs in a disciplined month by month way. From there, take small amounts of money to learn about precious metals, bonds, futures, options, and anything else. But always keep chugging away on the disciplined purchases of the index fund. I wrote some of my opinions here if you are interested: http://www.patientwealth.com/advice-i-wish-i-had-when-i-was-18/
      One thing I recently read on a personal finance blog that I hadn’t looked into was investing in preferred stock.

  • Jay Oct 5, 2016, 7:07 am

    Neat guest post. And I’m glad that you mentioned peer-to-peer lending. I’ve been looking at some of the online platform available (like Lending Loop) that lets you lend to others. The interest rates are appealing compared to traditional fixed income options so I’m curious to dip a toe in. Thanks again for the reminder!

    • Dan Palmer Oct 27, 2016, 6:43 am

      I agree that P2P lending does look attractive with its 6-8% yields and apparently low risk. BUT (a big but), for the most part P2P lending has emerged since the last market crash, so we have yet to see how a crash will affect the default rates. When job losses and wage cuts are on the rise and budgets get tighter, my guess is that P2P loans are going to be the first ones to be defaulted on. After all, if you are a borrower, you likely suspect that P2P lenders have the least recourse in the case of a default. I may dip my toes in P2P one of these days, but very cautiously.

      As for gold and bonds, I agree with most of the other comments that they are lousy investments for 20 year-olds since they offer low yields at the time of your life when you can tolerate the highest risk. Real estate is the only one that offers returns much better than inflation, but real estate investment is much harder than most people assume.

      For the typical 20-year-old investor, PatientWealthBuilder hit the nail on head- stick with index funds. And since you’re young, you can afford to be diversified into some high-risk, high-yield areas such as emerging markets and low/medium cap stocks.

  • Financial Coach Brad Oct 5, 2016, 7:22 am

    Hmm… I’d actually tell someone in their 20s to avoid each of these. *Maybe* a small investment in real estate, but really, someone so young should be seriously looking at stocks for the best long-term returns.

  • Financial Panther Oct 5, 2016, 9:49 am

    I have to say, I don’t think I agree with any of these. A 20 year old absolutely does not need any position in bonds, especially since he or she will have 30 or more years before they need the money. My own portfolio is 100% stocks, since I’m willing to ride the volatility out.

    P2P lending is also another investment that makes little sense to me. It can be pretty risky, isn’t particularly liquid, and is hugely tax inefficient, meaning that if you’re going with P2P lending, you need to have it in a tax-advantaged account. I’m a big believer in the Simple Path to Wealth strategy of a guy like JLCollins. No need to complicate things by throwing in weird alternative investments, unless you have extra money to play around with.

    • Full Time Finance Oct 5, 2016, 6:17 pm

      I’m going to have to disagree with you on bonds. The reality is a young person does not know their risk tolerance and thus should keep some money in safe investments like bonds. It should be 20 percent though with the bulk in stocks. Statistics show that the vast majority of people can’t help but market time because they outrun their risk tolerance in a decline. Unfortunately I can’t support using gold, i think money there is a speculation not an investment.

      • Financial Panther Oct 6, 2016, 6:10 pm

        Here’s my thinking. If your invested in tax deferred savings, your essentially putting that money out of your way. You can’t get to it easily, in any event. Given this natural barrier between you and your money, why would a 20 year old care what the market is doing today? Assuming your 20 year old understands that markets go up over time and volatility is short term, why would you put any of your money into bonds while in your 20s?

        I can see having bonds in your portfolio if you’re drawing down on it, but if your in the wealth accumulation stage of your career (which virtually every 20 year old is in), then why would you tie up any portion of your money in an asset class that historically will not give you great returns as compared to equities?

        If its coming down to behavior, well, I suppose I there’s really not much anyone can do about that other than to hope you can teach a person in their 20s not to panic.

  • kim Oct 6, 2016, 7:19 pm

    Why no mention of the basics – no investment until: credit card debt paid, have sufficient emergency fund, taking advantage of matching retirement account at work?
    The four mentioned options are anything but the most profitable and safest investments.
    Online CDs can generate better interest than most bonds and do not require commissions.

  • PatientWealthBuilder Oct 6, 2016, 8:02 pm

    Call me crazy but not only should a young person be in 100% in stocks they should also consider leverage. So they should really be 150% to 200% in stocks with some hedge to protect in downturns. This is a good strategy for someone who has the discipline to stay in the game for 40 to 60 years.

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