Starting investing in your 20s is the single best financial decision you can ever make. Why? Because as a young person, you have the greatest asset in the world on your side: time. Having time is so important when it comes to investing because it allows you to experience the effects of compounding on your investments for longer.
Investing does not have to be complicated, but when you are starting out you may have many other commitments that take your focus. Building a career, finding somewhere to live, and paying off student loans can really eat up young people’s time and money. That’s why we’ve made it easy by giving you the knowledge and tools so you can begin your investing journey.
Our CEO, Emmet Savage, explained MyWallSt’s investment methodology nicely in one sentence: ‘Start early, practice often, study the masters, and enjoy the pursuit.’
Our mission is not just to get people to start investing, but to get the world investing successfully.
The most beneficial investing advice for 20-somethings is to start right now. Here’s why:
1. Time is on your side
The most potent combination for wealth creation is time plus compound interest, the greatest advantage young people have.
What is compound interest?
Warren Buffett calls compounding ‘the eighth wonder of the world’. We here at MyWallSt like to call it ‘compound magic.’ It involves holding a stock for a long period of time and allowing the interest to grow upon interest. Compounding is the interest of your initial investment plus the interest it accumulated over the previous years. Over the course of ten or twenty years, the effects of this on your investments are often quite profound.
Are you a Spotify or Netflix subscriber?
Most of us spend around $18 a month on digital entertainment services and barely notice it leaving our account. If we had saved the same amount every month for 50 years, it would total $10,800.
However, if you had invested that money in the stock market for one year, your monthly investment of $18 could grow 10%. Year two is when compounding kicks in. It can be difficult to explain, so let’s look at this table which shows how much you could earn in 50 years by investing $18 a month ($216 a year) in the stock market.
It’s very important to remember that you can obviously invest more than $216 a year and a 10% return is very conservative. *MyWallSt stocks are up 150% on average vs the S&P 500’s average return of 55% over the past four years.
2. You know young money
You may think you know nothing about investing, but as a young person, you’re part of the next generation, therefore knowing the consumer themes that will shape markets; what brands they wear, what products they buy, and what apps they use. Older people struggle to know what companies are popular and those which have a future, but this will all come more easily to you.
What’s more, you are the generation that remembers your household having dial-up internet, getting your first laptop, signing up to the world’s first social media sites. This experience has given you a deep understanding of technology companies that are now the most profitable stocks you can buy. For example, a single share of Amazon has gone from $18 to $2,185 since its IPO in 1997, a split-adjusted increase of over 180,000%. Investment analysts are researching the information you already know because you’ve lived it. This knowledge gives you a great head start when you start buying shares.
3. Investing in your 20s helps you save for all of life’s experiences
The most important reason for starting to invest when you’re young is for financial freedom. Individuals in their 20s have the most to save for, including buying your first house, raising children, and planning for retirement — all of which don’t come cheap. Have you ever looked at your income and wondered how you will ever save enough for a deposit for a house or your children’s college tuition? Basic incomes can no longer provide individuals with everything they need and investing is one of the solutions.
How to invest in the stock market
If you want advice and access to stocks that are up 150% on average vs the S&P 500’s average return of 55% in the same period, download the MyWallSt app now and we will help you start building your market-beating portfolio today!
Read the entire ‘How To Start Investing In Your 20s’ series here:
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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
Financial Writer at MyWallSt
Nicole's favorite stock is Etsy because she loves its original and handmade items. She believes people are going to stop buying mass-produced items and start purchasing ‘one of a kind’ fashions and furnishings. In a world of sameness, Etsy has the advantage.