You’re probably in your 20’s or about to enter the ‘young adulthood stage’ as you read this article. But that’s actually a good thing! It means you wanted to envision your future realistically!
The earlier you start, the higher earnings you can generate, especially by the time of your retirement. But with all the opportunities in the marketplace, when or where should you invest?
The best beginner’s investment for 2020 is ahead of you!
1. Retirement Plan
This is usually what most people think when they’re young: ‘It’s too early!’. As a matter of fact, the younger you invest, the more you can get in the future.
Let’s say 7% is the rate of return in your area. If you started investing $500 at the age of 25, you’d get around $2,008,829 checkout when you’re on your 60!
But if you started to invest in age 35, and paid $1000 contribution, you’ll only receive $1,600,000 in your retirement. That’s 20% less of the accumulation you can receive when you start on your 20’s even if your annual contribution is 50% higher!
Why is that?
In terms of compounding interest, time is your most significant advantage! Although a considerable starting value makes a difference, so much more when you start early! You can even start with the amount of $100, and increase over time.
Another reason is because of the Tax Deferral Benefits giving you less tax to pay! However, this could hurt your future investment since you have to pay for all the taxes you ignored for the past couple of years with the Deferral. Instead of the 7% rate of return, it will deduct to at least 5.25%.
2. S&P 500 Index Funds
The safest, cheapest, and most rewarding investment especially for youth like you. It’s an investment of 500 stocks either from a mutual fund or exchange-traded fund (ETF) Form.
The S&P 500 Index provides 10% of the average rate for its investors. So if you plan to invest $10,000 and an annual rate of 10%, then you’d be able to receive $100,000 for your retirement age in ’60s.
$10,000 (personal) + 10% (Average Return) = $100,000 (at the age of 60).
It’s a lot less than the other investment, but it’s worth a try, especially when you’re still young.
However, expense ratios can differ from time to time. It can be as low as 0.03% this year or gain 35% next year.
3. Real Estate Investment Trust (REITS)
This is probably one of the most popular investments nowadays. Everybody seems to be taking off but leaving only their REITS in place since it has been performing really well in the past several years.
The only disadvantages are buying an expensive individual property without guaranteed tenants and maintaining the property.
Other than these reasons, what are the benefits?
This is the benefit of the Investment Trust. It’s a mutual fund but holds individual properties. You’d be able to enjoy earning in the Real Estate, but someone is taking good care of your business for you.
You can get your real estate through them as well. Instead of single-handedly buy a single property with a possible low-income commission, REIT would help you create a commercial real estate portfolio in any parts of the world. How cool is that?
Real Estate has been one of the two relatively stable sectors aside from utilities. Even if a pandemic or war is going on, this type of investment would continually reward you with a steady dividend yield, tax advantages, and a low volatility rate.
4. Home Investment
Now that you have real estate to offer, what about your own comfort?
We all know how it feels like to stay in a place that gives you peace of mind and security. But investing in a house has substantial equity over time due to mortgages fees, and increasing value of your property.
Even with leverage, the price appreciation of your property is much higher!
However, not everyone can afford to buy a house. If you’re still young, take time to balance your income and expenses, and give it some time to think about it. After all, it’s a big financial decision that not everyone can pull off.
5. Pay Off your Remaining Debts
If you were born in a super fortunate family that can afford your college tuition fees, and other expenses, you might want to skip this option. But if not, take the time to read the next paragraph.
At least an average debt of $32,600 is what a usual degree-holders face right after they graduate. This debt puts lots of pressure on their financial security and makes them go to work immediately.
Whether you have college loans or not, make sure that you have enough generated income to divided your expenses, savings, emergency fees, and debt on balance. Because if you tried to prolong the time to pay your loans, this would just reduce your cash flow for the upcoming years.
Don’t worry, after some time that you paid all of these, and you’d be able to enjoy your earnings fully! An excellent investment indeed!
6. Invest in your Health and Wellness
What’s the importance of all these investments when you can no longer use it, and enjoy it? This is why it’s the utmost importance to take care of your health – physical, mental, and emotional well-being.
Whether you signed up for medical insurance just in case, you were sick, and need medical attention or attend gym sessions to build a healthy and fit physique. It’s all under this category!
This necessary and urgent since you don’t know when accidents are about to occur. Health is Wealth! Remember that!
Additionally, I’ll bring up the attention of focusing on investing more time on your skill – increasing knowledge. If you have all the resources and guts to go on, why not enroll for a degree or course that would help you boost your experience? You can even simply buy books or hire someone to help you out.
Either this or that, the personal investment would create more opportunities for you in the present, and in the future!
The bottom line is, the opportunities are handed down to you, and it’s in your decision whether to take them or not. But investing in one of the options I’ve given is guaranteed to be one of the best investments you can ever make at a young age!
If you already have savings, try to research a little bit more on each, and start investing now!
