Thread by @MoneyWell_

The Ultimate guide to Investing in your 20s ‼️

Starting your investment journey in your 20s is the best way to end up becoming millionaire

The Magic of Compounding can only be seen when you have time by your side, they both move hand in hand

Here's how to invest in your 20s 👇

1/ Benefit of Investing early -

✓ Time

While money may be tight, young adults do have one thing going for them: time. The magic of compounding allows investors to generate wealth over time & requires only two things: the reinvestment of earnings & time.

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✓ Higher Risk Ability

An investor's age influences the amount of risk they can withstand. Young people, with years of earning ahead of them, can afford to take on more risk in their investment activities.

✓ Learn from Mistakes

Young investors have flexibility & time to study investing, learn from their successes & failures. Since investing has a fairly lengthy learning curve, they are at an advantage as they have years to study the markets & refine their Investing strategies.

2/ Things you must do -

1️⃣ Avoid borrowed money
Don't take any kind of loan while in your 20s, unless it's educational loan. This is the biggest financial mistake teenagers make. You don't need a house of your own, an expensive phone
(You are still just a baby to this world).

2️⃣ Insurance
As soon as you're in your 20s & have started earning, invest in your insurance.

✓ Life Insurance (Term Plan)
✓ Health Insurance

When you Insure yourself at an early age, the premium is comparatively alot cheaper.

These are the only insurance required.

3️⃣ Investment Journey
The best thing of your 20s is that you aren't earning alot, so most of your tax liabilities are very low. This means that your in-hand income will be alot higher in percentage. You can invest more.

What should be the ratio?
Invest atleast 20% of your income

3/ Now, let's play with some numbers -

Assume, you're 20 yo & invest your money each month until you're 65.
You make a plan that by the time you're 65, you must have accumulated 1 crore.
This 1 crore today, is worth 3.5 crore at that time. Why? Inflation

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So, Retirement age = 65 yo
Accumulated Amount = 1 crore
Inflation = 5%

How much money will you have to invest a month, so that your investment becomes INR 1crore by the age 65?

If you earn a mere 10% return on your investment, you'll have to Invest just INR 2000/month (US$28).

Shocked? You only have to invest INR 2000 each month for the next 45 years with a 10% return on investment and 5% inflation, you'll end up with INR 1 crore (US$1,38,000) by the age 65.

Now think, what if you can invest 4000, 5000....a month? The whole equation will change.

Now, what if you're 30 yo & invest the same amount - INR 2000 a month with 10% return & 5% inflation uptil the age 65.

How much will you accumulate?
INR 50 lakh (US$69000)

Saw what just happened here?
That's a whopping 50% money gone just because you started 10 years late.

🔖 This is the power of starting early. Don't wait. Just start investing or else everyone will keep growing and you'll always stay where you were.
Don't just spend all your money in partying and roaming. Start investing for a better future. START NOW!!!!!

4/ But, Where should I invest?

❌ Fixed Deposits - They are not inflation friendly. So, please don't ever think of putting your money in FD's.

✅ Stocks & Equities (Buy & Hold)
✅ Mutual Fund
✅ Gold - Since 1990, it has given an average return of 10%
✅ Cryptocurrency

5/ What should be the ratio?
Go for high risk - high return

Here's your investment ratio -
✅ 30% - Stocks & Equities
✅ 40% - Mutual Funds
✅ 20% - Gold
✅ 10% Cryptocurrency

So that was 'The Ultimate guide to investing in your 20s'. I hope you liked it.

For more educational threads on money, finance, and economics, do follow the page @MoneyWell_