Getting started in the investing world is very important for your long-term financial health. I remember when I got my first job out of college.
My boss told me the best time to be invested in the market was yesterday!
The sooner you invest, the faster you can make the power of compound interest work for you.
That’s why I wanted to put together this guide to help people to get started investing in their 20s (especially millennials).
A lot of people think you need a bunch of money to get started with investing.
That’s not true at all. Even if you just invest $200 a month, it can snowball into a large sum!
1. Be willing to take more risks
One of the biggest advantages of youth is that you can make mistakes and take bigger risks. Losing 30% of your money at age 21 is a lot less painful than losing 30% of your money at age 60. The difference is probably in the thousands or millions…
In your 20s you should make as many investing mistakes as possible. Investing is a lifelong classroom and the teacher is loss.
Take it from someone who has made a lot of mistakes…you learn fast when you lose your own hard earned money.
Be willing to take risks. As I mentioned before, even if you lose all your money at age 21, you’ll still be fine in the long-term. You’re not going to have a ton of your money in your 20s, so be courageous and take risks.
Don’t be afraid to invest in high risk, high return opportunities. The biggest one that comes to mind is cryptocurrency.
Cryptocurrencies are highly volatile. Your $500 could be $5,000 or $50,000 three years from now…or it could be $0. But the risk is worth it since you don’t have much anyways 🙂
2. Increase concentration in your portfolio
Speaking of taking risks, you should have increased portfolio concentration in your 20s. Typically, most people suggest 20 – 30 stocks in a well diversified dividend portfolio.
However, when you are young you can take a bigger risk by investing in fewer stocks. In your twenties, you can even go as low as 15 stocks in your portfolio. If one of them turns out to be a home run investment, you’ll be able to reach retirement faster.
3. 401k match
Many companies offer 401k matches these days. This is free money. Always take the 401k that your company offers.
Even if you take the money out of the 401k (and pay the 10% penalty fee) you will still have earned free money. A lot of people don’t take advantage of this for some reason. Don’t make this mistake too!
Free money is free money 🙂
4. Read investing books
Reading is the ultimate pastime of any great investor. I like to read at least a dozen new investing books every year. Sure, some of the content is repetitive, but once in a while I get some really great observations and tips.
When you’re just starting out investing, you need to soak up as much information as possible.
Here are some great investing classics that any dividend investor should read:
This is a must read for any investor. Ben Graham is the father of value investing and mentor to Warren Buffett. This book was written over 50 years ago, but will still provide insights to investors 200 years from now.
Another Ben Graham book. A must read if you want to better understand how to analyze stocks and financials.
Phil Fisher is the father of growth investing (and another Warren Buffett mentor). He’ll teach you how to evaluate the qualitative factors that make a great business.
Joel Greenblatt has one of the most successful investing track records of all time (50%+ a year). He discusses his frameworks for spotting great companies.
A wonderful book to get a basic insight into how Warren Buffett reads financial statements.
Peter Lynch is the most successful mutual fund investor of all time. He teaches how ordinary people like you and me can beat Wall Street suits with fancy college degrees.
5. Follow industry titans
Other great reading material is the shareholder letters of prominent investors and hedge fund managers. Many of these industry titans highlight their investment strategy and give insight into why they’re so successful.
Best of all…these letters are free!
Here are a few industry titans to follow:
1. Warren Buffett
2. Charlie Munger
3. David Einhorn
4. Daniel Loeb
5. Bill Ackman
6. Read investment write ups
Seeking Alpha is one of the best write ups for do it yourself investors. It’s basically a crowd sourced site where people can post opinions, comments, and investment write ups on any company.
It’s a great way to get started, interact with other like minded investors, and learn about various companies.
When I first started investing in college I must have spent at least two or three hours a day on that site! It was immensely helpful in my development.
7. Take courses
The age of the internet is the greatest time to be alive. In the old days, learning about investing was very difficult. These days, there are a ton of sources online to learn about investing.
That’s why I created several investing courses myself!
I’ve created several courses on financial statement analysis and even dividend growth investing. You can check them out here.
8. Learn accounting
The number one skill for any investor is the ability to read financial statements and understand accounting. Warren Buffett has said accounting is the language of business.
I’ll let you in on a secret. 80%+ of investors that own dividend stocks don’t know how to read a simple financial statement. If you can do this, you’ll have a big leg up on most investors out there.
If you want to learn more about accounting and financial statement analysis, check out my books. I have written two on the subject. I’ve broken everything down into simple and easy to understand explanations!
Investing in your 20s is very important. The sooner you start, the sooner you can reach retirement!
Investing may seem like another world (in fact it is). It is very easy to get overwhelmed with so much information out there. In my experience, it’s best to just get your hands dirty and learn the process.
You’ll learn much better in action than you will reading books on the sidelines. Application of investing is half the battle to success!
Readers, do you have any other tips you’d love to share? How did you invest in your 20s? I’d love to know. Let me know in the comments!