How to Invest in Your 20s

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For a lot of young people, learning how to invest in your 20s hangs pretty low on their priority list.  If this sounds like you, don’t fret.  The problem with investing in your twenties isn’t that you’re a slacker who doesn’t take your future seriously (if you’re taking the time to read this article, we know that’s not you).


The problem actually lies in two major mental barriers that affect millennials:

Your twenties are the key to building wealth and unlocking the power of passive income. Learn to invest in your twenties with these 4 easy steps!1) Overcoming the idea that you can’t afford to save a lot of money at this point in your life.

The simple truth is that you probably have more control over your cash flow now than you ever will.  Once you have a family, kids, a mortgage, etc., the game changes.  Big time.  With some discipline and planning, you can actually save a lot more than you think.  Even if you start out small, getting started is the most important step.

2) If your parents didn’t teach you (or you don’t have a finance degree), then investing is probably a foreign concept to you.

You’ve never really had to think about grown-up stuff like this before, so figuring out how to invest in your 20s can be super overwhelming.  There’s good news though: with today’s technology, it’s actually easier than ever for anyone to get started (even with little to no experience).

Despite these challenges, investing in your twenties is absolutely critical in terms of overall earnings power.  Let’s take a look at the best ways to take advantage of these important years.

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investing in your twenties

investing in your twentiesStep 1:  Understand that time is on your side

And it won’t always be that way.  The power of compounding becomes much stronger the longer you can let it work for you.

Consider this: If you start saving $100 bucks a month at 25 years old (just $1,200 a year!) you’ll have $187,500 by the time you’re 65, assuming a 6% annual return.

HOWEVER, let’s say you waited ten years and didn’t start saving until 35 years old.  Keeping everything else exactly the same, you’d end up with only $94,800.  Barely half of what you would have had before. That’s why it is so critically important to get started now.

investing in your twentiesStep 2:  Automate your savings

The best way to make sure you keep up with regular contributions to your investments is to set up an automatic bank draft each month that goes straight to your brokerage account(s).  By automating your savings, you won’t be tempted to spend that extra money each month on stuff you don’t need, since the money just goes straight to your investments.

Don’t underestimate the value of setting this process up- getting out of your own way is so important here.


If you have a 401(k) at work, make sure you are contributing the maximum for each pay period that your employer will match.  This is basically free money for you, don’t pass it up!

investing in your twentiesStep 3: Keep your fees low

Step 1 showed you the power of compound interest.  Unfortunately, it also works just as potently in the opposite direction.  Yes, we’re talking about fees.




Assuming you’ll be building your portfolio using exchange traded funds, or ETFs (we don’t recommend buying individual stocks until you are much more familiar with the ins and outs of investing), you’ll be paying a small annual fee for each of those funds.  This isn’t a bad thing, as long as you keep yourself in check.

You are likely best off using low-cost index funds that mirror the stock market (for example, an S&P 500 index fund).  This also takes away your excuse of not being a stock market wizard; index funds are a great way for beginners to invest.  Index funds have extremely low fees which have made them quite popular among both new and experienced investors.

As a general rule of thumb, you should only invest in funds that have annual expense ratios under 0.50%.  There are plenty of funds that are even under 0.20% per year.  If you’re paying any more than .5%, you’re being ripped off.  Don’t get ripped off.


If you’d rather sign up for a brokerage account where you can more readily take out your money if you need it (as opposed to waiting until retirement) we recommend TradeKing. We have a “how to” article that walks you through it step by step.  At $4.95 per trade and no account minimums its one of the more user/millennial friendly (and trusted) investing services. You can open an account and start investing in mere minutes.


investing in your twentiesStep 4: Be Aggressive

In order to achieve higher returns, often times it means taking on more risk with your investments.  Remembers, stock prices fluctuate every day with the market, some more than others.

Because you have time on your side, learning how to invest in your 20s allows you to take a more aggressive approach with your investments in hopes of locking in higher returns.  This means favoring stocks over bonds, and buying companies that have higher growth potential (and more risk). If you choose to be conservative while you’re young, you risk losing out on market gains and compromising your long term savings and retirement goals.


New to VTX Capital?  We are passionately driven to educate and empower regular, everyday people to invest their own money and manage their own financial lives.  As a low cost online alternative to a traditional financial advisor, VTX Capital offers investment programs to clients which include diversified investment model portfolios, market commentary, and other educational resources.  Learn more here.


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Updated: 06/28/2016
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Jeff Proctor
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Jeff Proctor

Jeff began his career at a private wealth management firm before deciding years later that there was a better way for investors to manage their money.He started VTX Capital with the goal to educate and empower regular, everyday people to manage their own investment portfolios and financial lives.

Jeff earned his undergraduate degree from Virginia Tech in Biochemistry, but investing has been his passion since his teenage years.Jeff has completed Level I of the Chartered Financial Analyst (CFA) designation as well as the Series 7 exam.

Aside from investing, he enjoys spending his free time volunteering with Best Buddies and as an EMT.He has two dogs, Annie and Sydney.
Jeff Proctor
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4 comments

  1. The point about parents teaching you or having a finance degree is so true. I’m always surprised by the number of people who know very little about their finances and money management! This is just something they don’t teach in high school. It takes a little bit of time, but learning about your finances can help you out tremendously. Doing it early is even better, because then time is on your side!

  2. Time is definitely on your side when it comes to saving and investing, although today’s low interest rates don’t help the savers much. So it’s a good idea to look at investing while you are still young.

    There are a lot of folks that are risk averse and it doesn’t help these folks when they see the volatility in the stock market, but as you mentioned, it’s good to take risks (i.e. be aggressive) when you are in your 20’s. If things go poorly, you have plenty of time to recover and continue saving for retirement in a bit more conservative fashion. Investing in high growth stocks initially can help you grow your account so that you can be more conservative later in life. Just stay clear of penny stocks!

    1. You’re right, everyone is a bit different when it comes to risk tolerance. And interest rates aren’t helping savers, but I think the important takeaway here is the importance of the HABIT of saving (even if you earn 0% on your money).

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