If you are in your 20s or 30s, and you plan on having a comfortable retirement (as far away as it
might look), you might not have a lot of options, but one of the best ones is investing early.
To live a comfortable life, it's a no brainer that you need a substantial amount of wealth.
And one of the best ways of doing this, especially for the working class, is to invest their money.
You see, you will be a lot wealthier when you start investing early. Here’s a great example,
Let’s say you decide to start investing $500 per month and earn a 8% investment return. If you
start at age of 25 and continue that strategy until you’re 60, you’ll have $2.16 million at
retirement. But if you start investing at 40 instead of 25, you would only have $341,000.
Of course, this simple example isn't anything new,
and it's dependent on an investment earning an 8% compounding year on year investment,
not factoring in inflation. But as I said, this is nothing new, and I bet you've probably heard
it a bunch of times already. But for the majority of people, this is still the best
way to grow your wealth and ensure you have a nice reserve to spend in your lean years.
In short, by starting early, you are setting yourself up for success.
In today's practial wisdom video, we'll be looking at some of the most important assets
and investment decisions you can make while young.
Now, let’s begin, shall we?
On the screen, in no order of importance, are the investments I'll be talking about in this video.
So, let's start with the first one.
1. Index Funds Stocks are one
of the best investments you can make before turning 40. While they may have very high risk,
the returns are among the highest. As you start your investment journey, you have a lot of time
to make and learn from mistakes, but you should always make smart, calculated investments.
Stocks have an average return rate of 10% based on the S&P 500 index as a the benchmark.
The truth is, not many investments will have such a high return rate.
As you build your index fund portfolio, consider adding bonds too. While bonds may
have the lowest return rate, they are the most secure. You need to ensure your portfolio has
about 10 – 20 % of weighted bonds. This ensures your investment is more secure. Additionall,
you could add the percentage and adjust it based on the risk appetite you have.
Recently, crypto index funds were introduced. While they have not yet been fully tested,
they seem to be quite promising. They current return rates range from 10 – 15%,
which is significantly high. But as the return rate increases, so do the risk.
A great advantage of index funds Is that they have low fees. The lower the fees, the more the
returns. One other benefit of index funds beyond diversification is that many index funds are
low fees. Investment fees will quickly reduce your returns, so you’ll want to avoid them to
the extent possible. As you buy the index funds, ensure you also look out for the tax implications.
2. Real Estate You will hardly ever go wrong with real estate.
Real estate is one of the best assets for multiple reasons. Firstly, there is almost always a deficit
in housing, and real estate assets almost always appreciate in value. The first step in real estate
investing is by purchasing your own home. Owning a residential property reduces your expenses,
such as rent. Once you won your own home, you can look into building other commercial properties.
These could be multi-unit homes, townhouses, offices and other properties.
However, if you’re not able to invest directly into the real estate market,
there are other options available. There are several crowdfunding platforms where
you can invest as little as $500. The money invested would then be collectively invested
into real estate properties together with other investors’ contributions.
These investments are known as REITs (Real Estate Investment Trusts).
3. Education
Statistics state that your 20s are the best time to study. According to research, your
20s and early 30s are the easiest time for you to acquire new knowledge. Therefore, it could be the
best time to get that extra degree. Acquiring education is important as it can set you up for
career success. However, you need to understand that not all education or learning is an asset.
As you do this, be careful because some learning can be termed a hobby
and probably can’t be monetized. If you want to invest in education,
start by looking for careers that you are custom to and one that can bring about success.
This could also be the best time to improve your financial literacy.
4. Startup Business Invest in a Start-Up
Business while your young. Why? With a business, the returns are unlimited.
You will have the capacity to earn as much as you can. With an unlimited ROI.
Another investment you should make in your 20s is a start-up business.
The opportunity for explosive ROI is incredible. Even if it isn’t the next Amazon,
investing in a business while young can bring some incredible returns.
You don’t necessarily have to start the business yourself, you can invest in other
people’s businesses in exchange for equity in their business. For example, you could be an
angel investor, and this is a great option if you know the founder. Your investment can be in the
form of a convertible note, which means it could turn into a loan if a specific criterion is met.
The other way is through crowdfunding.
There are multiple crowdfunding sites with incredible startups that have high potential.
Before investing in a company, ensure you read about the founder in-depth and understand the
story behind the company. Choose companies that have a strong storyline and are backed
by founders who have some form of education, experience, or training in the business industry.
The other way is through working with a venture capital fund.
You can become an accredited investor and proceed to become a venture capitalist.
However, these funds require a minimum investment amount and have stringent qualifications.
5. Treasury Bills
Treasury Bills are necessary investments for every investor at whatever age.
There is no better time to buy Treasury Bills regularly than when you are young.
Treasury Bills are short-term government-guaranteed debt instruments
issued to finance expenditure and control the money supply.
Treasury bills have three tenors 90 days, 182 days and 364 days.
Everyone has bills to pay, whether it's tuition, rent or even professional exams.
You can easily invest the money you have at hand into treasury bills and cash out when the bills
are due. This lies under the finance concept of Asset and Liability Matching, which involves the
purchasing of an asset to finance the payment of a future liability. Treasury bills are entirely
risk-free, so your returns are guaranteed, unlike other investment options. Also, the returns are
pretty decent, so why not invest in them? 6. Growth stocks & dividend stocks
We have made it very clear that being in your 20s and 30s is an opportunity to make risky bets,
because if you lose your money at this stage, you still have time to recover. So investing in
stocks offers an excellent avenue to put part of your money into a high-risk, high-reward venture.
Growth stocks are simply stocks that are expected
to grow at significantly higher rates than the industry average.
These stocks generate more sustainable positive cash flows and revenues than their peers.
Dividend stocks, on the other hand, are usually stocks of companies that are financially stable
and mature, which means the share prices are less volatile than growth stocks.
Dividend stocks should be included in your portfolio at a young age.
They provide opportunities to earn an income consistently over a long period of time,
provided the companies keep performing well.
7. Exchange-Traded Funds
Now let’s have a look at ETFs, which are quite similar to the index funds we talked
about earlier. EFT’s are baskets of securities with multiple assets
like stocks, bonds, and gold, making them similar to index funds.
They trade like stocks meaning investors can buy and sell shares on an exchange. Their versatility
makes them valuable tools for investing either in broad market indices like the S&P 500 or in
sectors, such as technology or health, and even sub-sectors, such as social media or robotics.
Some examples of EFT’s are the Schwab U.S. Large-Cap ETF,
Global X Robotics & Artificial Intelligence ETF and iShares Global Clean Energy ETF.
8. Commodities in economics, a commodity
is an economic good, usually a resource, that has full or substantial fungibility:
that is, the market treats instances of the good as equivalent or nearly so
with no regard to who produced them. There are several ways to invest in this. The first is
to purchase varying amounts of physical raw commodities, such as precious metal bullion.
Investors can also invest through the use of futures contracts or exchange-traded products
referred to as ETPs that directly track a specific commodity index. These are highly volatile
and complex investments that are generally recommended for sophisticated investors only.
Another way to gain exposure to commodities is through mutual funds
that invest in commodity-related businesses. For example, an oil and gas fund would own
stocks issued by companies involved in energy exploration, refining, storage, and distribution.
The advantages of commodity investing are diversification in the portfolio,
potential return and a potential hedge against inflation. In addition, commodities have shown the
most robust performance during inflation periods, making them one of the best assets to own.
9. Annuities An annuity is a contract
between you and an insurance company in which the company promises to make periodic payments to you,
starting immediately or at some future time. You buy an annuity
either with a single payment or a series of payments called premiums.
Some annuity contracts provide a way to save for retirement. Others can turn your savings into
a stream of retirement income. Still, others do both. If you use an annuity as a savings vehicle
and the insurance company delays your pay-out to the future, you have a deferred annuity.
On the other hand, if you use the annuity to create a source of retirement income and
your payments start right away, you have an immediate annuity.
The two most common types of annuities are fixed and variable. There is also a hybrid
called an indexed annuity, also referred to as an equity-indexed annuity or a fixed-index annuity.
Annuities are often products investors consider when they plan for retirement—so
it pays to understand them. They also are often marketed as tax-deferred savings products.
However, annuities come with various fees and expenses, such as surrender charges,
mortality and expense risk charges and administrative fees.
Annuities also can have high commissions, reaching seven percent or more.
10. Cryptocurrencies and Initial Coin Offerings
It’s only up until recently that cryptocurrencies and ICOs have sparked interest from the old
school main street investors. However, with billions of dollars raised in ICO
financings and over a thousand different cryptocurrencies currently available,
these rapidly changing markets are tempting for investors.
It is also difficult for most individual investors
to make sense of these complex investment products and determine their risk levels.
But what we do know is that they have incredibly high returns.
The returns could range from 12% all the way up to 200%. Some ICO’s have performed
extraordinarily. For instance, the OTA had a return on investment of 13,000 times. Meaning
if you invested a dollar when it was offered, you would’ve made thirteen thousand dollars.
Well guys, there you have it. If you haven’t liked our page yet, what are you waiting for?
We have amazing content that will help your grow and build your life, so make sure to
check our other videos out. With that said, have a great day! and see you in the next one.