It might feel like a foreign concept to start saving for retirement and invest in stock holdings when you are in your 20’s. But it turns out this is the best time to start. If you received a college degree and were able to find a decent job right after graduating, you are on your way to starting a lifelong career. Not only is it a smart thing to do, but investing in stocks and doing it regularly and responsibly can quickly become a hobby or passion.
At this age, chances are your expenses are low – unless you are a big spender – especially if you haven’t invested in real estate or started a family yet. Saving money is easy at this age if you act responsibly. So start investing your money today! Here are 5 tips on how to manage your finances and create an efficient stock portfolio for every young professional out there.
Diversify, diversify, diversify!
One of the best tips for creating a well-versed portfolio is to diversify! Don’t put all your eggs in one basket, but rather spread your money and invest in a variety of companies. Variety is better than quantity. A healthy portfolio is one that has diversity over a wide spectrum of categories. Another thing to keep in mind is to invest in stocks with regular dividends and ones with potential for long-term growth rather than short-term bursts of profit. This is less of a risk and has a better chance of making money – although it might take longer to see growth.
Find a reputable budget brokerage firm.
There are plenty of budget brokerage firms out there where you won’t have to pay an arm and a leg in fees just for investing. Another way to keep your fees to a minimum is to let your money sit; don’t panic and move your money around just because you see a dip in the market. If you let your money sit, the commission and management fees will be at a minimum and you can invest your hard-earned money elsewhere.
Start saving early.
Of course the concept of saving for retirement at such a young age is crazy for some people, but the earlier you save the better you’ll be later in life. Most companies offer some sort of 401(K) plan for retirement, so definitely consider starting one if this is offered by your employer. If not, consider an IRA – Individual Retirement Account – to put a small percentage of your income each month away for savings. But keep in mind that you will be penalized with fees if you withdraw this money, it is meant for retirement.
Become a regular investor.
The key to keep money accruing through your stock holdings is to become a regular investor – as long as it’s possible for you. Obviously things can happen to prevent you from doing this – like more life expenses or loss of employment – but if you can, do it.