Investing in Your 20s & 30s For Dummies
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The most exciting thing about investing during your younger adult years is that you can be more aggressive with money that you’ve earmarked to help you accomplish long-term goals. To achieve typical longer-term financial goals, such as being financially independent (also known as retiring), the money that you save and invest generally needs to grow at a rate much faster than the rate of inflation. If you put your money in a bank account that pays little or no interest, for example, you’re likely to fall short of your goals.

Ownership investments are investments like stocks, where you own a piece of a company, real estate, or a small business that has the capability to generate revenue and profits. Over the long term, consider ownership investments if you want your money to grow much faster than the rate of inflation and don’t mind more volatility in your investments’ values.

The downside to such investments is that they can fall more significantly in value than non-ownership investments (for example, bank accounts, bonds, and so on), especially in the short term. So don’t put money into ownership investments that you may need to tap in the short term for rent money or your next vacation. To reduce the risk of ownership investments, diversify — that is, hold different types of ownership investments that don’t move in tandem.

Sharing in corporate growth and profits: Stocks

If you want the potential to share in the growth and profits of companies, you can gain it through buying shares of their stock. Stocks are shares of ownership in a company. You can buy stock directly in individual companies through a brokerage account, or you can buy a collection of stocks via a mutual fund or exchange-traded fund.

You don’t need to be a business genius to make money in stocks. Simply make regular and systematic investments, and invest in proven companies and funds while minimizing your investment expenses and taxes. Of course, there’s no guarantee that every stock or stock fund that you buy will increase in value. In Chapter 8, I explain proven and time-tested methods for making money in stocks.

Profiting from real estate

You don’t need to be a high roller to make money investing in real estate. Owning and managing real estate is like running a small business: You need to satisfy customers (tenants), manage your costs, keep an eye on the competition, and so on. Some methods of real estate investing require more time than others, but many are proven ways to build wealth.

Among the key attributes of real estate investment are the following:

  • You build wealth through your rental income exceeding your expenses and through property-value appreciation.
  • You can leverage your investment by borrowing money.
  • You must be comfortable dealing with property management, which includes finding and retaining tenants and keeping up (and possibly improving) your property.

Succeeding in small business

Some people have hit investing home runs by owning or buying businesses. Most people work full-time at running their businesses, increasing their chances of doing something big financially with them. Investing in the stock market, by contrast, tends to be more part-time in nature.

In addition to the financial rewards, however, small-business owners can enjoy seeing the impact of their work and knowing that it makes a difference. Emotionally and financially, entrepreneurship is a roller coaster.

Besides starting your own company, you can share in the economic rewards of the entrepreneurial world through buying an existing business or investing in someone else’s budding enterprise.

About This Article

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About the book author:

Eric Tyson, MBA, is a bestselling personal finance author, counselor, and writer. He is the author of the national bestselling financial books Investing For Dummies, Personal Finance For Dummies, and Home Buying Kit For Dummies.

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