A general idea that floats around our society is that study and early work life, or what we call the “20’s life”, is not the ideal time to invest your money. Call it our culture or structure- we believe that investing is an older man’s job. Experts nevertheless, suggest the very opposite. Financial advisors like Winnie Sun made an informed argument in favour of kick-starting investment from an early age.

A fair share of our personal independence comes from the ability to choose freely. More importantly, the luxury of freedom of choice is often entangled with the possession of wealth. We often like to quote “my life, my rules”, but let’s sit back for a moment and give this a thought. The reality is that until you have cash in your pocket, you will be living your life according to what life chooses for you, not what you prefer. So, it is not rocket science to understand that money is one of the primary drivers behind a person’s access to freedom. If you don’t start investing your money early in your 20s, it only means you’re delaying your freedom of living your life according to your rules.

Many of us inhabit the practice of saving money from student life, but we often tend to remain sceptical about growing that money. This approach thwarts the possibility of making the best use of our savings. We often fail to realise that utilising savings from an early age in the form of investment opens the door to attaining F.I.R.E. (Financial Independence, Retiring Early). Becoming an early investor also provides an unmatchable upper hand in fulfilling life-long dreams, aspirations and gives you the luxury to take bigger risks in the following years of life. Now, let’s talk about the facts we need to keep in mind before investing as students and young professionals in our 20s.

Determine your Investment Goals

Having a clear idea of what you want to achieve through your investments is crucial before you begin your journey as an investor. From short-term goals like travelling to favourite places or buying your dream car to long-term goals like early retirement or starting your venture, investment can come in handy for a wide array of objectives. You have to fix your goals and set your investing plans accordingly so that they align when you reach the end of the tunnel.

Keep an Emergency Fund

Despite the innumerable doors of opportunity, early investments open up; it is unwise to invest all your savings at once. That is why it is highly suggested that you build an emergency fund prior to investing, which can cover your basic living expenses for at least six months. This fund is for keeping you in check in case any unplanned expense such as prolonged illness or loss of earning source occurs. Hence, it is sensible to prioritise your emergency fund first and plan on investing only when the cushion of 6 months is in place.

Start Small, Grow Big

Many of us believe that we need a lot of money to start investing. But experts suggest that, as beginners, it is more convenient and more feasible to get going with smaller amounts in your 20s. As an investor, you have to do your homework and choose where to invest, but it is always wiser not to dive in right away but rather grow gradually, if not exponentially, once you have sunk in. Try to find short-term, low-cost and low-risk investment options like bonds, mutual funds or saving accounts for putting your money rather than aiming for higher stakes from the very beginning.

Diversify your investment

It is essential to allocate your money to different sectors in order to smooth out your investment journey. Putting all the eggs in one basket increases the risk of a failed investment in case that sector faces heavy loss. Rather, diversifying investment in different sectors gives yourself a much higher possibility of sustaining through other sectors even if one of your investments fails. Maintaining the right balance between investment options is one of the key features of a successful investor.

Calculate your Risk

The infinite possibilities of investment can never expel the risk of falling or losing money. Financial deals are unpredictable. No matter how cautiously you act, you are always subject to that uncertainty. You can only go forward with your investments if you accept that risk and carry on. Therefore, a young investor needs to have a clear idea of the risk of putting his money in a certain field. Low-risk investment options offer smaller gains and smaller risks. On the other hand, high-risk options like cryptocurrency or stocks can make you quick money but come with the suspense of facing bigger losses. Young investors should not be discouraged from making risky investments as they have the luxury of recovering from any loss for a more extended period, but it is to say that you should calculate the risk of your investments and decide on how much to gamble with.

It is high time for students and young professionals in their 20s to start acting and finding ways to grow their money by investing in profitable sectors for a protected financial future. The sooner you start researching the market, the closer you are to securing your financial freedom. As an investor, it is vital to take a measured approach and be patient during the early days. You can undoubtedly grow your knowledge and money with time by taking informed decisions. Most investments involve some level of volatility, and understanding how to manage the feelings it evokes is an essential part of the learning process.