Investing in your 20s: 10 tips to get started

Content Type: Article

As you begin to invest in your future, set yourself up for long-term success by developing healthy money habits now.

The news tends to highlight the biggest investment trends—social-media-fueled stock bubbles, cryptocurrencies named after pets or the latest scandal—but investing your hard-earned dollars for the first time doesn’t have to be scary.

No matter your age or life stage, there will always be competition for your money. As a young adult, you might have student loans to pay off, a down payment on a home to save for or monthly expenses that can’t be ignored. Even if you are financially disciplined, it’s easy to make mistakes, such as being influenced by the fear of missing out (FOMO) on the latest hot investment.

Amid so many competing financial needs, how can you save for your future? And how can you avoid the common pitfalls investors tend to make? Here are 10 good habits that can help you achieve lifelong investment success.

Pay yourself first

If you plan to invest once you have money available after paying for immediate needs, it might never happen. Instead, commit to “pay yourself first” by saving a regular amount from every paycheck before you start spending it on other things.
Make it automatic

Automatic payroll deductions into a workplace savings program, such as a 401(k), means you won’t see the money or be tempted to spend it. And, if you open an investment account outside of your 401(k), you can automate transfers from your checking or savings account.
Take advantage your employer’s matching program

If you receive a matching employer contribution to a retirement plan, contribute enough to get the full match. Otherwise, you’re leaving money on the table.
Set goals and monitor your progress

If you are investing toward a specific goal, like retirement or a major purchase, creating a timeframe and determining a precise amount to save can help make it a reality. (Be honest with yourself, too, and try to set realistic goals.)

A clear timeline should also guide how you invest the money. For example, a two-year timeframe means you should play it safe and invest in something secure, such as certificates of deposit or a money market account. A longer timeline, such as retirement in three or four decades, could allow you to accept greater exposure to the market’s short-term volatility, with the confidence that over the long term, you should be able to recover from any short-term losses.

Track your progress and adjust your plan as needed.
Shut off the short-term noise

A common mistake is to overreact to short-term market ups and downs. As humans, we are often driven by our emotions. To counter that, strive to maintain a perspective tied to your investment goal and related timeline.

Understand and accept that stocks naturally rise and fall, which goes hand in hand with their potential to outperform bonds or cash over the long term. There are no guarantees, but the longer away your investment goal, the less relevant short-term market volatility will be.
Get smarter

Even if you don’t care that much about investing, understanding the basics can help you avoid making regrettable mistakes. Learn by reading or listening to relevant podcasts. [link: https://www.regions.com/insights/podcasts] Access popular personal finance websites. Talk with people whose financial knowledge you respect. Keep learning and apply that knowledge over time.
Work with a professional

If you have access to free financial advice through a workplace financial wellness program, take advantage of it. Later in your career, as your finances become more complex, consider hiring a financial advisor.
Understand your investment personality and honor it

Whether you tend to be risk-averse or feel comfortable taking greater risks, understand who you are as an investor and respect your risk comfort level. You’ll sleep better at night.
Think long-term if you can

When analyzing investment performance, use the most relevant benchmark and make a comparison over a long enough period as to be meaningful. For example, the 5-year or 10-year performance of a mutual fund will be more meaningful than how well it performed last quarter or last year. Investment styles fall in and out of favor through various cycles. Look at a full cycle for the most accurate view.

Compare your investment with the most relevant benchmark. The performance of a small-capitalization (smaller company) U.S. stock fund could be compared with the Russell 2000 Index, for example. Conversely, the performance of a large-cap U.S. stock fund could be compared with that of the Russell 1000 Index or the S&P 500 Index.
Remember that starting early is smart

If you are a young adult, take full advantage of that fact. Begin investing as soon as you’re able to, especially for your retirement. Time and compounding returns can have a powerful snowballing impact on your long-term wealth. Waiting too long can be a lost opportunity you can never get back.