For people in their 20s, investing early is crucial to build wealth for the future. With a long time horizon, investors in their 20s should focus more on high-risk, high-return assets like stocks and real estate. Although riskier, stocks and real estate have historically delivered much higher returns over the long run than safer assets like bonds or savings accounts. This allows compounding to work its magic. Even small, consistent investments early on can snowball into a large nest egg by the time you retire. This article explores the best assets to invest in for 20-somethings to maximize wealth creation.
Stocks are one of the best assets to invest in your 20s for higher returns
As a 20-something investor, stocks should likely form the core of your portfolio. Stocks carry higher short term risk, but have delivered around 10% annual returns over the past decades – much higher than other assets. Thanks to compounding, even small amounts invested consistently in a diversified stock portfolio can grow exponentially over long time periods. Index funds like S&P 500 ETFs provide instant diversification and simplicity. For 20-somethings with steady incomes, stocks are hands down one of the best assets to invest in.
Real estate can also be a smart asset to invest in your 20s
While less liquid than stocks, real estate has also historically delivered strong returns while carrying moderate risk. Particularly in one’s 20s, real estate remains affordable to finance and hold for the long term. Options include buying an investment property to rent out, investing in REITs, or simply buying your own home to build equity. As with stocks, compound growth allows even modest real estate investments to deliver sizable returns over decades. With rents and property values often rising faster than inflation, real estate stands out as a smart asset to invest in your 20s.
Other assets like precious metals, crypto, VC funds can diversify your early stage portfolio
Once your core portfolio of stocks and real estate is established, more speculative assets can provide further diversification. Cryptocurrencies remain highly volatile, but their long term adoption continues to grow. Allocating a small portion to crypto can provide huge upside. Developments like NFTs and the metaverse are also opening up new investing frontiers. For more risk tolerant investors, venture capital funds and precious metal ETFs can counterbalance stock market risk.
Stocks and real estate should form the core of your portfolio in your 20s thanks to their higher return potential. Supplementing with small allocations to emerging assets can provide further diversification. The key is consistency in investing early and often to allow compound growth to work its magic.