There are a lot of reasons why you should invest in your twenties, it’s like preparing for a storm before it comes but in this case we are securing the bag for old age or future purpose, before we begin to dissect the benefits that come with investing in your twenties, let’s analyze the word INVESTMENT. What is INVESTMENT? The term “investment” can be defined as any mechanism that is used to generate future income. In other words, investment is an asset or item acquired with the aim of generating income.
We view investment in analyzing it from an economic angle, an investment is the purchase of goods that are not consumed immediately but are used in the future to acquire or create wealth. If we look at it from a financial aspect investment is a monetary asset purchased with the mindset that the asset will provide income in the future or will be sold later at a higher price with a substantial profit (Real Estate). It also involves the purchase of stocks and bonds. There are some jargons associated with investment t and they include:
STOCK
A stock which is also referred to as a “share,” is a small stake of ownership in a business. Anyone is allowed to purchase or sell shares of ownership by public companies to their businesses on the exchange. Once you own a stock, then automatically you are a part of the company, you are entitled to certain benefits and privilege if you purchase the stock of a particular company.
Bond
A bond can be defined as a debt of a country, state, or organization.
DIVERSIFICATION
Diversification simply means acquiring a variety of investments that are different from each other, in order to ensure that your success or failure isn’t dependent on a particular one (not putting all your eggs in one basket). In order to diversify properly, you have to ensure that the investments you have are not similar. For instance, if you are in possession of three different clothing companies, the same risks will still be encountered. But if you have one clothing company, a car company, and a furniture company, that is DIVERSIFICATION.
Portfolio
A portfolio can be defined as the collection of all investments owned by a single person that is being held by a single broker. Even though you own some bonds, stocks or ETFs, bear in mind that everything available in your account would be your portfolio.
ETFs
ETFs simply mean exchange-traded funds which give you the opportunity to make use of one security in the purchase of small pieces of various investments. An ETF is commercially referred to any fund that has numerous stocks, bonds, or commodities been held. This fund is then divided into shares and is taken to the public market in order to be sold to investors.
Your twenties is a time when there are too many goals but little to save for. You may want to buy a home, purchase a new car, or travel the world all at a time and at the same time you need to save for the future. There are a lot of investments you can make in your twenties, for example, you can purchase stocks and bonds, go into real estate or even providing loans online to people which they will pay back with interest. An online loan is simply money that is borrowed from a lender who operates online. While the process for an online loan can vary from lender to lender. Instead of tying up the money in the bank you can simply start an online loan in which you provide people money to solve their needs and in turn, they pay you back with interest. People these days even prefer online loans to our normal traditional ways of collecting loans. Now to the importance of investing in your twenties, they are as follows;
Release the power of compound interest by imposing early investments
When you’re in your 20’s, it’s easy to convince yourself that you have enough time to organize your financial life, waiting or procrastinating can be a game changer when it comes to saving early. Let’s take for instance you invest $300 each month beginning from the age of 20 and you don’t stop until you’re 60-years-old. If an average of 8 percent return can be managed during this period, more than $1 million dollars will be available in that account. If you waited until you were ten years older that is you will be 30 to get started, at the age of 60-years-old, there will be an estimate of $440,445 in your account. Starting early makes a huge difference in investments.
Bear in mind that money is a tool
When you’re in your twenties and you have made up your mind to build wealth, it all begins with you having the ability to realize that the money you earn is just a tool waiting to be used. Instead of seeing the money earned as a problem solver thinks of it as a tool or weapon that can be used to create the wealth and lifestyle that you wish for yourself by making wise choices that are related to spending, savings and investing. If you are able to learn how to become a diligent saver and investor early on in your life, then you will be able to achieve the life you desire.
Learn to ramp up savings
Is it possible to get loan for your investment? It’s a risky process as you will end up losing the money. That is why ramping up your savings as you age is another importance of investment in the sense that if you begin with just 1 percent of your income, then increase the percentage by 1 percent each year. When you reach your 30’s, 10 percent of your income will be saved and in your 40’s, 20 percent of your income will be saved. If a raise is gotten every year, try and raise the percent also thereby you tend to enjoy more benefits. Finally, saving for retirement is not the only reason to carry out well-planned investments. Many investments, such as those made in dividend stocks, can provide a steady income stream throughout the life of the investments have certain advantages over those who wait to begin investing.
