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Best Investing Strategies for People in Their 20s

  • ProfitOnTheStreet
  • May 22
  • 3 min read

Man in blue shirt wearing headphones, focused on laptop work at a wooden desk. Background has a plant and coffee cup. Relaxed mood.

Introduction: Why Your 20s Are the Best Time to Start Investing

If you’re in your 20s, time is your greatest financial asset. Thanks to the power of compound interest, every dollar you invest today can grow exponentially over the next few decades. Yet many young adults feel overwhelmed or unsure of where to begin.


This guide breaks down the best investing strategies for people in their 20s—whether you're a student, recent grad, or early-career professional. No fluff, just real, actionable advice to help you build wealth from a young age.


1. Start With a Strong Financial Foundation

Before investing, make sure your financial basics are in place:

  • Pay off high-interest debt (like credit cards)

  • Build an emergency fund with 3–6 months of expenses

  • Understand your monthly cash flow

Once your base is solid, you're ready to invest confidently.


2. Leverage the Power of Compound Interest

Starting early gives you an edge that’s impossible to replicate later. Here’s a simple example:

  • If you invest $200/month starting at age 25, earning an average 7% annual return, you’ll have about $525,000 by age 65.

  • If you wait until age 35 to start? That same $200/month only grows to $245,000.

Lesson: Time > timing. Start now.


3. Use Low-Cost Index Funds and ETFs

One of the best investment strategies in your 20s is to buy and hold low-cost index funds or ETFs.


Why they work:

  • Diversified exposure to the market

  • Lower fees = higher returns over time

  • Easy to automate and forget


Popular ETFs for beginners:

  • VTI – Total U.S. Stock Market

  • VOO – S&P 500 ETF

  • VXUS – Total International Stock Market

Look for funds with expense ratios under 0.10%.


4. Max Out Your Roth IRA (If Eligible)

A Roth IRA is a retirement account that lets your investments grow tax-free. You invest with after-tax money now, and withdrawals in retirement (after age 59½) are 100% tax-free.

In 2025, you can contribute up to $7,000 per year if you’re under 50.


Why it’s ideal in your 20s:

  • You’re likely in a lower tax bracket now

  • Decades of compounding tax-free growth

  • Flexibility: You can withdraw contributions (not earnings) penalty-free anytime


5. Invest in Yourself

While investing in stocks is important, don’t overlook the value of investing in your skills.


Your 20s are a great time to:

  • Take courses to boost your income potential

  • Network and build relationships in your industry

  • Learn high-income skills (coding, finance, writing, etc.)

Remember: a higher income = more money to invest.


6. Automate Everything

Set up automatic transfers from your paycheck or bank account into your investment accounts. Automation:

  • Reduces emotional decision-making

  • Helps you stay consistent (even during market downturns)

  • Makes saving feel effortless


Use apps like Fidelity, Vanguard, Schwab, or Betterment to automate contributions to your Roth IRA or brokerage account.


7. Avoid Speculation and Get-Rich-Quick Schemes

Crypto pumps, penny stocks, or risky options trades may sound exciting—but they’re rarely a sustainable path to wealth. In your 20s, stability beats hype.

Stick to a plan. Avoid FOMO. Focus on long-term growth.


8. Stay the Course — Even When the Market Dips

Market volatility is normal. In your 20s, downturns are buying opportunities. Keep contributing even when prices drop. Over time, the market has always trended upward.

👉 Pro tip: Don’t obsessively check your portfolio. Review quarterly or semi-annually.


9. Consider a Target Date Fund for Simplicity

Not ready to pick individual ETFs or rebalance your portfolio? Consider a target date fund, which automatically adjusts risk based on your retirement year (e.g., Vanguard Target Retirement 2065 Fund).

It’s a “set-it-and-forget-it” option perfect for young investors.


10. Track and Optimize Your Net Worth

Use tools like Empower (formerly Personal Capital) or Mint to:

  • Track your investments

  • Monitor your net worth

  • Stay accountable to long-term goals

Knowing your financial progress keeps you motivated to keep investing.


Final Thoughts: The Best Time to Start Investing Is Now

Investing in your 20s isn’t about getting rich quick. It’s about building habits, growing steadily, and giving your money time to work for you.


Focus on low-cost, diversified investments, automate your strategy, and stay consistent—and your future self will thank you.


FAQs About Investing in Your 20s

Q: Should I pay off student loans before I invest?A: Prioritize high-interest debt first (above 6–7%). But if you have manageable loan rates and an emergency fund, it’s smart to start investing early—even while repaying loans.


Q: Is it risky to invest while the market is volatile?A: Volatility is part of investing. In your 20s, volatility is an opportunity. You have time to recover and benefit from dips by buying at lower prices.


Q: How much should I invest in my 20s?A: Start with what you can. Even $50–$100/month compounds over time. Aim to invest 15–20% of your income as your earnings grow.

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