Financial freedom is everyone’s dream. It unlocks many opportunities, most of which are unachievable when living paycheck to paycheck. Investing is mandatory to plan a secure future. Early investments ensure you can meet your goals on time to start living your ideal life. It makes every sense to keep aside some money in investment options to help you build wealth.
The question is when, where, how, and how much to invest. Your ideal options would let you balance risk and reward, depending on your needs and goals. Also, consider your income, monthly bills, outstanding loans, and other financial obligations before investing. You do not want to starve yourself of money or put the burden of additional debt on yourself.
This blog deciphers the best rewarding investment plans for everyone – including low-earners. You will also get to understand why you must begin now. Your current position should not intimidate you, but use it as a motivation to start investing.
Benefits of Early Investment Plans
You have seen that it is best to start your investment journey now. What makes that a significant step in your financial journey? What are the gains? Why do people invest money? Below are the reasons to start your financial planning and goals early.
1. Compounding is Pivotal
Investments grow when given time to mature. The interest or profits earned in one period helps to boost your money’s value when reinvested for another period, which is called compounding. Starting your journey while still in your 20s or 30s can guarantee a better growth rate than when you start at 50. Retirement will catch up with you much faster than you think.
Ideally, you should invest a portion of your monthly income in an investment plan with high returns to get the most out of compounding.
Evaluate the gains against applicable fees, taxes, and handling expenses to determine how an opportunity will benefit you. Comparing various options helps you to make perfect decisions for your investments.
2. Early Involvement is Rewarding
Financial discipline is much easier to maintain when you are still young. You have fewer obligations, and your income helps you stretch further than when you reach 40 or 50.
For instance, people earning a sustainable income at 20 with no family ties can use that cash for investments without worrying about other commitments like rent, bills, or groceries.
At that time, you will learn to spend only when necessary. It forms a habit and lifestyle you will not likely abandon. Also, you will have more liquidity for investment opportunities with better returns. Time is your friend in investment, and early involvement makes it easier to get the most out of it.
3. Freedom to Explore
Risks make people strong. Sometimes, losing is gaining. First-hand experience is a practical lesson. You try your hands on a new crypto project promising fast returns but lose all your investments.
You discover the risk was not worth it and can help others avoid similar problems. You will also want to learn more about scams and evade them.
At an early age, your minimal obligations allow you to take risks without much worry. You need not stress about feeding your children or paying bills. Your income will act as a cushion from fallouts. You would not have spare money when you have the mortgage, car insurance, school fees, medical cover, and other bills.
4. Better Learning Opportunities
The lack of information is the worst enemy of potential growth. You need reliable data to assess risks and decide on a reward before taking available opportunities. You want to exhaust all resources on how to invest money at 20. Today’s technology makes it easy for millennials and Gen Zs to learn about investments with online resources.
Social media has become a haven for information on various investment opportunities. You can learn from other people’s experiences and use the information to inform your decisions. Your age group will also have more understanding of navigating the stock market and how to maximize returns.
What Are Your Options?
You have already seen that you can fall for financial scams and lose your hard-earned cash. Researching profitable investment opportunities will put you on the path to your wealth. Below are some ideal choices for a young investor looking for the best ways to invest money in your 20s and become financially independent.
1. Stock Markets
Public companies list their stocks on the stock exchange to help liquidate their assets and expand. Purchasing them enables individuals to own a portion of the company. The investment grows when the stock increases by gaining more value. The process is risky but yields high returns when you get it right.
Remember, stocks can take time to increase the price. Also, they can drop depending on market conditions. Never buy impulsively. Analyze various firms to make sound decisions and maximize your returns.
Also, find company stocks that pay dividends – part of the profits earned from the firm’s operations. They increase your total returns from the investment.
2. Real Estate
Real estate is a viable investment plan, especially when you get your hands on properties near or in fast-growing cities. But not everyone can afford to buy and manage a rental business suite, especially when talking about folks below 40.
REITs are a reliable option for young investors. Investing in Real Estate Investment Trusts allows you to own part of the real estate industry without buying properties, managing tenants, or dealing with repairs. Your job is to choose a reliable firm. The rest is up to them.
The investment involves pooling funds from various investors to purchase properties. They then leverage their returns. You get paid the profits (dividends) from the trust’s rentals or resale proceeds. Your job will only entail logging in to your dashboard and assigning new funds to your portfolio.
You may also withdraw some of your investment during an emergency. Unlike stocks, you can sell your REITS anytime and get your money back. It is an excellent option for young investors with limited funds.
Crypto involves digital currency and assets you buy and sell, like Forex trading. However, you do not need to be a professional trader to make money from it. You can quickly learn the basics with online resources and start investing in cryptocurrencies like BTC, ETH, and BCH.
Investors can choose from diverse options, like HODLing, staking, trading, or mining. Diversify your portfolio and use different approaches based on the market conditions.
Crypto is volatile – prices can go up and down with no warning. And that is where its profitability lies. The drastic rise and drop give investors a competitive edge. They buy when the prices go low and sell high. That is how you can turn a profit from cryptocurrency markets. This investment option is ideal for youngsters who have fewer responsibilities.
4. High-Yield Savings
Bank savings can be a short-term investment, ideal for young investors getting started. The accounts give you competitive interest rates and guarantee safety for your money. You can open a savings account by committing a distinct saving duration or mode of operation. For instance, a bank may allow you to withdraw funds after six months or a year.
High-yield savings accounts have low risk because they have cover from the FDIC. That makes it ideal for saving for your emergency fund, tuition, or first car. Compare interest rates and features from different banks before opening an account.
For instance, one bank may allow you to withdraw from savings accounts three times a year, while others will give you two free withdrawals for the year and charge you a nominal fee for subsequent transactions.
Most often, savings account accounts have no ATM or mobile banking services. That protects your investment from sprees and impulse spending. Understand your obligations and the benefits of your account before putting in your money. A high-yield savings bank is an excellent way to get started with investments, especially if you are below 40.
5. Government Bonds
Government debt securities are among the safest investments you can make. The bonds have low risk and offer a steady flow of income. They also allow investors to benefit from a nation’s economic growth while keeping investments safe.
Every dime invested in government bonds gets backed by the nation’s full faith and credit. That means your investment is safe, no matter what happens to the economy.
These bonds are long-term investment options, remaining in your portfolio for years and decades. Their maturities range from one year to 30 years, and you can pick the duration based on your risk appetite.
Governments use the money raised from bond sales to pay for infrastructure, public services, and military expenses. They are loans, where you are the lender and the government is the borrower.
While young, you have enough time to plan and make safe investments. Invest your money into REITs, cryptocurrency, high-yield savings accounts, and government bonds to get started. Research is fundamental in every staking opportunity.
Understand the market conditions, learn the strategies of successful investors, and master risks associated with each investment option. Be consistent and patient with your investments. You will soon see the rewards. Also, consult an expert stock broker, Forex trader, or financial advisor for an unbiased opinion.