How should a young person invest?

Posted by Fitz Villafuerte under Investing on June 3, 2016

I’m a fresh graduate and will start my new work soon. Many say that one should invest as early as possible so I would like to do it as soon as I get my first salary. The question is, how should someone like me in my 20s invest?

Answer:

The most important lesson for young investors is to learn to save early in their careers. This will enable you to establish an emergency fund to weather any bumps in your career or personal life, and begin building a nest egg.

Because of compounding, money invested in your 20s is far more important in building a long-term nest egg than money invested in your 40s or 50s. Unfortunately, still many people start too late.

Beyond establishing good savings habits, the key elements of investing don’t change much over time:

  1. Diversify broadly across and within asset classes,
  2. Keep your total costs as low as reasonably possible,
  3. Rebalance your portfolio over time, and
  4. Be mindful of taxes and focus on your after-tax returns.

If you get these right then you will be well ahead of the majority of investors.

Answer from Burton Malkiel




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