|
Published:
June 9, 2021

Investing in Your 20s & 30s For Dummies

Overview

Take advantage of the decades ahead and invest in your financial future today 

You may be at the stage of your life where you’re still watching every penny, but you know the earlier you invest, the more time your money has to work for you. Investing in Your 20s and 30s For Dummies provides novice investors with time-tested advice, along with strategies that reflect today’s market conditions. You’ll get no-nonsense guidance on how to invest in stocks, bonds, funds, and even real estate—complete with definitions of all the must-know lingo. You’ll also learn about the latest investment trends, including using robo-advisors to manage your portfolio, relying on apps to make fast trades, and putting your hard-earned cash in digital currencies. Armed with the knowledge and strategies in this book, you can invest wisely, monitor your progress, and avoid risking too much. Today’s investing landscape is changing at record speed, and this book helps you keep up. Find information on the latest tax laws, financial lessons learned from the COVID-19 pandemic, and popular funds for the 2020s.   

  • Learn the investment basics you need to get started 
  • Discover new tools and technologies that make it easier than ever to participate in the market 
  • Build a diverse portfolio that reflects your values, financial goals, and risk tolerance 
  • Feel more confident as you fund an investment account, choose equities or funds, and plan for the future 
  • Make an impact with your money by selecting socially responsible investments 
  • Figure out how much money to invest in employer-sponsored accounts or other retirement plans 

If you’re a little unsure about stepping into the world of investing, Investing in Your 20s and 30s For Dummies gives you the confidence you need to establish a smart investment strategy. Grab your copy today. 

Read More

About The 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.

Sample Chapters

investing in your 20s & 30s for dummies

CHEAT SHEET

Investing as a young adult holds the promise of paying off big for decades to come if you know what you’re doing. This Cheat Sheet highlights important beliefs that can help guide you in your investment journey. When you understand your investing goals and beliefs, you can build your knowledge, do research, and make good choices that make the most of your money and investments.

HAVE THIS BOOK?

Articles from
the book

Investing appears to be complicated and complex. But if you can take some relatively simple concepts to heart and adhere to them, you can greatly increase your success. Here are ten time-tested principles of investing success. Following these principles will pay you big dividends (and capital gains) for many years to come.
Most investing apps are offered by existing larger companies as another option for their customers to connect to and interact with what they offer. And, of course, companies would love for you to use their apps so they can continue to promote themselves to you and ensure that you remain a loyal customer. The investment companies you do business with — banks, mutual fund companies, brokerage firms, and so on — are no exception.
Everywhere you look or listen, you’ll find plenty of investing opinions and advice. Some of it may be great information but not a good fit for you. Much of it is mediocre or downright awful, biased, uninformed, and misleading. Here are ten important things you should know and do to evaluate investing resources and get the best and right information for you.
What are your investing beliefs? Most investors haven’t taken the time to consider that question, let alone to answer it. During the sharp stock market slide in 2008, some investors started following particular gurus who claimed to have predicted the financial crisis. These investors wanted to believe that someone out there could predict important financial events and tell folks how to time their investments to benefit from what was about to unfold.
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.
Plenty of younger folks have debts to pay and lack an emergency reserve of money for unexpected expenses. High-cost debts, such as on a credit card, can be a major impediment to investing, in particular, and accomplishing your future personal and financial goals, in a broader sense. A high interest rate keeps the debt growing and can cause your debt to spiral out of control, which is why dealing with such consumer debt should be your first priority, just before establishing an emergency reserve.
With money that you’re investing for shorter-term goals, you have a more limited menu of investments to choose among. For your emergency/rainy-day fund, for example, you should consider only a money market fund or bank/credit union savings account. Down-payment money for a home purchase that you expect to make in a few years should be kept in short-term bonds.
Most folks know to look for a bank that participates in the U.S.-government-operated FDIC program. Otherwise, if the bank fails, your money on deposit isn’t protected. FDIC covers your deposits up to a cool $250,000. Some online banks are able to offer higher interest rates because they are based overseas and, therefore, are not participating in the FDIC program.
During your younger adult years, you may not be thinking much about retirement, because it seems to be well off in the distance. But if you’d like to scale back on your work schedule someday, partly or completely, you’re best off saving toward that goal as soon as you start drawing a regular paycheck. Maybe the problem with thinking about this goal stems in part with the terminology retirement.
Investing as a young adult holds the promise of paying off big for decades to come if you know what you’re doing. This Cheat Sheet highlights important beliefs that can help guide you in your investment journey. When you understand your investing goals and beliefs, you can build your knowledge, do research, and make good choices that make the most of your money and investments.
If you’ve been with me since the beginning of this chapter, you know that the best banks that are focused online should have a cost advantage over their peers that have branch locations. Well, there are other financial companies that have similar, and in some cases even better, cost advantages (which translates into better deals for you): credit unions, discount and online brokerage firms, and mutual fund companies.
Banks developed an account that is similar to a money market mutual fund, which they typically call a money market deposit account (MMDA). Banks set the interest rate on MMDAs, and historically, those rates have been a bit lower than what you can get from one of the better money market mutual funds (although this has been less true during the extended period of low interest rates during the 2010s).
If you’re one of many young adults with lingering student loan debt, you’re probably wondering whether you should focus your efforts on paying down that debt or instead invest the extra cash you have.The best choice hinges on the interest rate on this debt (after factoring in any tax breaks) and how that compares with the expected return from investing.
To accomplish your financial goals, you need to save money, and you also need to know your savings rate. Your savings rate is the percentage of your past year’s income that you saved and didn’t spend.Part of being a smart investor involves figuring out how much you need to save to reach your goals. Not knowing what you want to do a decade or more from now is perfectly normal; after all, your goals, wants, and needs evolve over the years.
Because the financial markets move on the financial realities of the economy and companies, as well as on people’s expectations and emotions (particularly fear and greed), you shouldn’t try to time the markets. Knowing when to buy and sell is much harder than you may think. As a young adult, you’re in a position to take more risks because you’re investing for the long haul.
When you purchase a bond, you should earn a higher yield than you can with a money market or savings account. You’re taking more risk because some bond issuers (such as corporations) aren’t always able to fully pay back all that they borrow.By investing in a bond (at least when it’s originally issued), you’re effectively lending your money to the issuer of that bond (borrower), which is generally the federal government or a corporation, for a specific period of time.
Paying off your mortgage more quickly is an “investment” for your spare cash that may make sense for your financial situation. However, the wisdom of making this financial move isn’t as clear as is paying off high-interest consumer debt; mortgage interest rates are generally lower, and the interest is typically tax-deductible.
Many good investing choices exist: You can invest in real estate, the stock market, mutual funds, exchange-traded funds, or your own business or someone else’s. Or you can pay down debts, such as on your student loans, credit cards, auto loan, or mortgage debt more quickly. © WAYHOME Studio / Shutterstock.comWhat makes sense for you depends on your goals as well as your personal preferences.
Get educated before engaging the services of any financial advisor. How can you possibly evaluate the competence of someone you may hire if you yourself are financially clueless?You greatly minimize your chances of making significant investment blunders, including hiring an incompetent or unethical advisor. You might be tempted, for example, to retain the services of an advisor who claims that he and his firm can predict the future economic environment and position your portfolio to take advantage.
Insurance companies, banks, investment brokerage firms, mutual funds — the list of companies that stand ready to help you invest your money is nearly endless. Most people stumble into a relationship with an investment firm. They may choose a company because their employer uses it for company retirement plans or they’ve read about or been referred to a particular company.
The attractions of banking online are pretty obvious. For starters, it can be enormously convenient, as you bank when you want on your computer. You don’t have to race around during your lunch break to find a local bank branch. And thanks to their lower overhead, the best online banks are able to offer competitive interest rates and account terms to their customers.
Regularly investing money at set time intervals, such as monthly or quarterly, in volatile investments such as stocks, stock mutual funds, or exchange-traded funds is called dollar cost averaging (DCA). If you’ve ever had money regularly deducted from your paycheck and contributed to a retirement savings plan investment account, you’ve done DCA.
Be sure to keep your extra cash that awaits investment (or an emergency) in a safe place, preferably one that doesn’t get hammered by the sea of changes in the financial markets. By default and for convenience, many people keep their extra cash in a bank savings account, which tends to pay relatively low rates of interest.
Just before, during, and for some time after the financial crisis of 2008 and associated severe recession, most types of real estate in most parts of the country declined in value. Thus, you may think that real estate isn’t a good investment, but you’d be wrong.Real estate is a solid long-term investment. Real estate, as an investment, has produced returns comparable to those of investing in the stock market.
As a financial counselor, I’ve seen that although many people lack particular types of insurance, others possess unnecessary policies. Many people also keep very low deductibles. Remember to insure against potential losses that would be financially catastrophic for you; don’t waste your money to protect against smaller losses.
Unless you earn really big bucks or expect to have a large family inheritance to tap, your personal and financial desires will probably outstrip your resources. Thus, you must prioritize your goals.One of the biggest mistakes people make is rushing into a financial decision without considering what’s really important to them.
Shares of stock, which represent fractional ownership in companies, offer a way for people of all economic means to invest in companies and build wealth. History shows that long-term investors can win in the stock market because it appreciates over the years. That said, some people who remain active in the market over many years manage to lose some money because of easily avoidable mistakes.
When they think of the “American dream,” one image that comes to the minds of many folks is owning their own business and possibly making it big by doing so. You have numerous choices for tapping into the rewards of the small-business world.If you have the drive and determination, you can start your own small business.
The long-term returns from stocks that investors have enjoyed, and continue to enjoy, have been remarkably constant from one generation to the next. Since 1802, the U.S. stock market has returned an annual average of about 6 to 7 percent per year above the rate of inflation. That’s a remarkable track record, but don’t forget that it’s an annual average return.
Anybody, no matter what his or her educational background, IQ, occupation, income, or assets, can make solid returns investing in stocks. To maximize your chances of stock market investment success, remember the following: Don’t try to time the markets. Anticipating where the stock market and specific stocks are heading is next to impossible, especially over the short term.
You may want or need to play it safe when investing money for shorter-term purposes, so you should consider lending investments. Many people use such investments through local banks, such as in a checking account, savings account, or certificate of deposit. In all these cases with a bank, you’re lending your money to the bank.
Many well-intentioned parents want to save for their children’s future educational expenses. The mistake that they often make, however, is putting money in accounts in the child’s name (in so-called custodial accounts) or saving outside retirement accounts in general. The more money you accumulate outside tax-sheltered retirement accounts, the more you will generally end up paying for college costs.
Who among us wants to lose money? Of course, you don’t! You put your money into an investment in the hope and expectation that you will get back more in total than you put in. And you’d rather your chosen investments not fluctuate too widely in value. When it comes to investing, no concepts are more important to grasp than risk and return.
https://cdn.prod.website-files.com/6630d85d73068bc09c7c436c/69195ee32d5c606051d9f433_4.%20All%20For%20You.mp3

Frequently Asked Questions

No items found.