Your 20s easily make up for the most crucial decade that you will experience in your entire financial life. It is a decade that can help make or break your ability to pay off your home on time, ensure that your hypothetical kids get to attend a good college, and enable you to retire when the time comes.
The following are reasons why you should consider investing during your 20s:
While cash flow may be tight, adults in their 20s have a time advantage. Albert Einstein had a good reason for referring to compounding as the 8th wonder of the world. Compounding makes it possible for you to generate riches over time. The good thing about it is that it only needs two things: time and earnings reinvestment.
For instance, investing $10,000 in a private pension on your 20th birthday will translate to more than $70,000 by your 60th birthday. This means that the longer you are willing to wait for the money to work, the more money it will generate for you in the coming years.
Take on More Risk
The amount of risk that an investor can withstand is normally influenced by their current age. A young investor who has many years ahead of him will be able to afford to take on additional risks. This is because the investor knows that they can easily earn back any money lost in an investment deal gone bad.
Investors approaching their senior years or retirement age will often be more opposed to taking unnecessary risks. Many will choose to gravitate towards options that do not have too many risks or unknowns. Common options for people in this group will include certificates of deposit, bonds, and investing in a retirement fund.
A pension guide will come in handy in helping you make a decision on which investments to make based on their volatility and ability to make good returns.
Learn by Doing
A person in his 20s will have enough time and flexibility to study the art of investing. They also get an opportunity to learn from their failures and successes. Considering that investments have a long learning curve, the younger investors have an advantage as they will have enough time to study different markets and refine the strategies to use when financing new ventures.
Apart from their ability to absorb increased risk, investors in this age group will also be able to overcome past investment mistakes as they attempt to recover from recent failures.
Young venture capitalists tend to be tech-savvy. They are able to research, study, and adequately apply different investing techniques and tools. Educational websites, online trading platforms, financial websites, and chat rooms provide numerous opportunities for investors to learn technical and fundamental analysis skills.
The technology available today, including financial apps, social media networks, and online opportunities can make immense contributions to the expertise, confidence levels, knowledge base, and experience of a young investor.
All that is required is a willingness to learn and be open to taking risks.
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