If you are starting your investing journey in your 20s then this Blog is absolutely for you .So in this blog , for all those who are in their 20s I will present a step-by-step guide so that you can start your investing journey .
Every important question will be answered .
Step 1 : What should be the Focus.
Step 2 : How to decide the investment amount ?
Step 3 : How does compounding affect our investment ?
Step 4 : Which Assets to invest in ?
Step 5 : How to Invest ?
#1 Things To do before investing
Starting Investing in your 20s is the best time to start because you have the most precious thing when it comes to investing , and that is TIME . Because the amount you invest is not as important as the duration for which you are investing . That's why , I would strongly recommend that you start your investing journey as soon as possible .
Step 1: What Should Be the Focus
The first step to investing in your 20s is to have a clear focus. What are your goals? What are your values? What are your priorities?
Your goals are the specific outcomes that you want to achieve with your money. For example, you may want to save for a house, travel the world, start a business, or retire early. Your goals should be SMART: Specific, Measurable, Achievable, Relevant, and Time-bound.
Your values are the principles that guide your decisions and actions. For example, you may value freedom, security, happiness, or impact. Your values should be aligned with your goals and reflect what matters most to you.
Your priorities are the areas of your life that you want to spend more time, energy, and money on. For example, you may prioritize your health, education, family, or hobbies. Your priorities should be balanced and realistic.
Having a clear focus will help you invest in your 20s with purpose and direction. It will also help you avoid distractions and temptations that may derail your financial progress.
Step 2: How to Decide the Investment Amount
The next step to investing in your 20s is to decide how much money you can and want to invest. This depends on two factors: your income and your expenses.
Your income is the money that you earn from your work, business, or other sources. Your income may vary depending on your skills, experience, industry, location, and other factors.
Your expenses are the money that you spend on your needs and wants. Your expenses may include rent, food, utilities, transportation, entertainment, debt payments, and more.
To decide how much money you can invest in your 20s, you need to calculate the difference between your income and expenses. This is called your cash flow. Your cash flow is the money that you have left over after paying for all your expenses.
To decide how much money you want to invest in your 20s, you need to consider your goals, values, and priorities. How much money do you need to save for each goal? How much money do you want to spend on each value? How much money do you want to allocate for each priority?
A simple way to decide how much money you want to invest in your 20s is to use the 50/30/20 rule. This rule suggests that you divide your income into three categories:
50% for needs: These are the essential expenses that you need to pay for living, such as rent, food, utilities, transportation, etc.
30% for wants: These are the discretionary expenses that you want to pay for enjoying life, such as entertainment, travel, hobbies, etc.
20% for savings: These are the money that you save for investing or achieving your goals.
Of course, this rule is not set in stone and you can adjust it according to your situation and preferences. The important thing is to have a budget that works for you and stick to it.
Step 3: How Does Compounding Affect Our Investment
The third step to investing in your 20s is to understand how compounding affects our investment. Compounding is the process of earning interest on interest. It means that when you invest money and earn interest or returns on it, you can reinvest those earnings and earn more interest or returns on them.
Compounding is one of the most powerful forces in investing because it allows your money to grow exponentially over time. The longer you invest and the higher the interest or returns rate, the more compounding works in your favor.
To illustrate how compounding affects our investment in our 20s, let’s look at an example. Suppose you start investing Rs.1000 per month at the age of 20, and you earn an average annual return of 10%. How much money will you have by the age of 30, 40, and 50?
Using a compound interest calculator, we can find out the answer:
By the age of 30, you will have Rs.209,378.
By the age of 40, you will have Rs.789,544.
By the age of 50, you will have Rs.2,432,899.
As you can see, your money grows significantly over time thanks to compounding. If you start investing in your 20s, you can take advantage of compounding and build substantial wealth for your future.
Step 4: Which Assets to Invest In
The fourth step to investing in your 20s is to choose which assets to invest in. Assets are the things that you own that have value and can generate income or returns. There are many types of assets that you can invest in, such as
- Stocks or Equity ( Our Best Friend or Highly Recommended ) ,
- Real estate ( Not recommended now , I personally Recommend you to start it in your 30s or 40s as It is that instrument of Investing that sucks lot of money at one time ),
- Gold ( A little Bit )
- Cryptocurrency
My Suggestion for investing is 10 % in gold as it is stable asset , 70 % in Equities , 0-20 % Crypto
Gold : In Gold , don't buy jewelry , ok ? We cannot go wrong ! You have to buy gold bonds e.g - Sovereign Gold Bonds (SGBs) which are released by the government .The return that you get is the existing rate of gold plus 2.5% , which is something that you should invest in . They are released every quarter and that’s when you can put in that money .
There are two splits in equities
Out of 70% , use 40 % to buy index mutual funds , which means you do not have to rack your brains , you will rely on experts ,they will track the stock market of India for you , and as the stock market rises , your money will also grow . As we said , over a long term period , 10-20-30 years , the stock market will only rise as it has been rising all these years . So that is where you will invest in something called the index mutual fund .
Invest the Remaining 30 % in small case . My Preference for that is Value and Momentum is momentum Strategy . where they invest in the stocks which keep rising before falling , so they bet on the momentum . It is a slightly faster , pacier kind of Investment , but small case is a great product which would simplify the whole way to do it . You don’t have to do any research , don’t take any load , You Just have to buy a subscription for Rs. 6000 / Year , and once you have done that , you get access to value and momentum , which I genuinely believe is a very very good way for you to get higher returns because we have target of 20% . The stock market gives a return of around 15% , so you need something that gets you closer to 20% . And then Finally crypto .
Don't invest in any meme coins . I will recommend only 3 coins
- Bitcoin
- Ethereum
- Solana
It would be risky and would have a lot of volatility , so don't keep a daily track of their movement . Just Remember Put and Forgot Rule and Withdraw it after 10 years .
Step 5: How to Invest
Personally I recommend the Zerodha App (Kite and Coin both ) for Stock or Mutual Fund Investment .
So Just Keep Investing regularly , The more regular you invest , the more you will see the magic of Compounding . If you Delay it , get scared , keep making excuses , then the money which can turn into crores , will remain in lakhs only . Don't make that Mistake !That will be the worst way of treating your financial wisdom .
I hope this blog post has helped you learn how to invest in your 20s. If you have any questions or comments, please feel free to leave them below. Happy investing! 😊
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