by T.Yeap
Created on: September 22, 2009 Last Updated: September 24, 2009
To most youngsters in their 20's, investing is still a foreign land yet to explore. However, it's crucial to start investing young because time is on your side, and if the investment
return only yields a modest 6% per year, the compounding interest at the end of their retirement age will make a big difference compared to the individual that starts investing in their 30's. Are you wondering how to invest smartly in your 20's? Here are several tips that I obtained while I was in my early 20's from my mentor and family.
return only yields a modest 6% per year, the compounding interest at the end of their retirement age will make a big difference compared to the individual that starts investing in their 30's. Are you wondering how to invest smartly in your 20's? Here are several tips that I obtained while I was in my early 20's from my mentor and family.
1) COMPANY RETIREMENT PLAN
Take advantage of your company's 401 (K) or other retirement plan that they offer, most company match 50% of your contribution up to the first 6% of your pay. It is also convenient that most of them offer direct deduction from your pay check and the deduction usually is before tax and therefore reduce your yearly income and less tax will be taken out each pay period. With the automatic contribution to your retirement plan each pay period, you will be able to invest in the market consistently. Also, make sure you review all the prospectus and pick 3 or 4 out of the bunch to enroll. If you are nervous about the investment, you can invest in things that you are familiar with as the prospectus of each funds will list out the major holding and their investment strategies.
2) INVEST IN IRA (INDIVIDUAL RETIREMENT ACCOUNT)
Besides the company investment, you should also open an IRA account with your own choice of brokerage firm. There's plenty to choose from and if you are more knowledgeable and you can manage your own investment, choose the online trading through Scottrade or E-trade. If you decide not to do it yourself, they also offer service to help manage the account for you. However, most IRA account required a minimum starting a mount of about $3,000 and then you can choose your own investment option either bimonthly, monthly, biannually or annually.
manage the account for you. However, most IRA account required a minimum starting a mount of about $3,000 and then you can choose your own investment option either bimonthly, monthly, biannually or annually.
The smartest choice will be investing a small amount bimonthly or monthly until the maximum contribution of $5,000 at the end of the year. It's similar concept with the company retirement plan, as you will need to choose different type of mutual funds or stocks you would like to purchase. IRA offered more variety, therefore your investment portfolio will be more diversified. It is also advised by investment guru that during your 20's, your portfolio should reflect about 90% stocks and 10% bond as you are able to take the risk
a small amount bimonthly or monthly until the maximum contribution of $5,000 at the end of the year. It's similar concept with the company retirement plan, as you will need to choose different type of mutual funds or stocks you would like to purchase. IRA offered more variety, therefore your investment portfolio will be more diversified. It is also advised by investment guru that during your 20's, your portfolio should reflect about 90% stocks and 10% bond as you are able to take the risk
3) CERTIFICATE DEPOSIT (CD)
It's is also wise to put aside some of your money in a CD for some stability as investment can be volatile at times. That's why many investment firms encourage people not to put all the eggs in one basket. Besides, most long term CD offers an average interest rate such as 3% for 5 year standard CD. But, you should only put the money in CD if you are not short in cash as this is not the best investment strategies for the 20's investor but it might be suitable for people that are not willing to take higher risk.
such as 3% for 5 year standard CD. But, you should only put the money in CD if you are not short in cash as this is not the best investment strategies for the 20's investor but it might be suitable for people that are not willing to take higher risk.
5) INDIVIDUAL STOCK BUYING
Investment requires knowledge, consistent monitoring and also patience. Time is moneyand while you are still young, you have plenty of time to make adjustment and diversify your portfolio from time to time. If you gain confidence throughout the years, you can start investing in individual stocks that are has good potential and yield good dividend that can be reinvested. Blue Chip stocks such as Proctor & Gamble (PG), Google (GOOG), Yahoo (YHOO), Kraft (KFT), Pepsico (PEP), and Coca-Cola (KO) will never go out of business and they will only strive to make their business better every year. Since the stocks are still relatively cheap at this time, it's a good chance that those stock will help you make a lot of money in the long run.
and while you are still young, you have plenty of time to make adjustment and diversify your portfolio from time to time. If you gain confidence throughout the years, you can start investing in individual stocks that are has good potential and yield good dividend that can be reinvested. Blue Chip stocks such as Proctor & Gamble (PG), Google (GOOG), Yahoo (YHOO), Kraft (KFT), Pepsico (PEP), and Coca-Cola (KO) will never go out of business and they will only strive to make their business better every year. Since the stocks are still relatively cheap at this time, it's a good chance that those stock will help you make a lot of money in the long run.
Invest wisely and you will be able to enjoy good life later on.
[Home Investors of America does NOT take credit for writing this article-
[Home Investors of America does NOT take credit for writing this article-
No comments:
Post a Comment