Are you in your 20s and planning to invest your money? Great, you are taking a step closer to securing your future financially! While investing at any life stage is crucial, it is more crucial when you are in your 20s. The 20s is a golden period of your life when you witness and experience different transitions in your life, such as finishing your education, earning your first income, planning your future, starting to take responsibility for your family, and so on. 

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As a result, the 20s hold the most significance from an investment perspective and need careful consideration. If you are juggling between if and buts of how to invest in your 20s, you have come to the right place. Allow us to help you get started. 

How Is Your Financial Situation During Your 20s?

The 20s is a very exciting period in life. You are young, adventurous, and believe in You Only Live Once (YOLO) in your daily decision-making, which also reflects in your finances. 

The early 20s

This period is typically fun and brings a big change in your life as you finish your education and try to figure out what you want to do in your life. You may not be financially stable or maybe just starting to earn at this stage. 

The mid-20s

By this age, generally, you are likely to have earned your first income. You may have started a job or your own venture. It is also alright if you are still figuring out your career via trial and error. While some individuals at this point would have consistent income sources, it is not the norm. That’s why this age is crucial for learning how to invest money in your 20s. It is important that you start investing during this period, even if it’s not a large sum each month. This will eventually accumulate and gain compounding income. It is also a good phase to plan for short-term goals such as buying a car or saving for a wedding. 

The late 20s

Your late 20s is a life phase where responsibilities tend to increase. You are earning now, might be looking out for your family, and planning to settle down in the coming years. This is the time by which you need to start investing regularly. You have the flexibility till this period ends to plan your finances and invest the maximum amount for your long-term goals, such as buying a house. 

In your 20s, you probably do not have much debt except for your higher education. Also, you have lesser responsibilities on your shoulder, which makes it a perfect time to invest and grow your money for the years to come. 

Factors to Consider When Investing in Your 20s

While investing money is important in your 20s, it doesn’t mean you should invest it just anywhere. There are four factors that you must consider to learn how to grow wealth in your 20s.

1. Invest realistically based on your income sources

In your 20s, you are likely trying to figure out your purpose and thus may not have a regular flow of income. However, this should not stop you from investing. To adjust this uncertainty, you can make a plan to invest a lump sum every few months or can start a small SIP to ensure your savings are on track. 

Based on your income pattern, decide the investment frequency and amount while adopting a  realistic approach. Do not select a large sum if you know your income sources fluctuate. Consistency is the key here. 

2. Your existing and future responsibilities 

You should also consider the responsibilities you have now and in the immediate or near future to decide how you should pursue your investment. For example, currently, you may have your parents to look after the entire family and your needs, which means you have the space to invest more money at present. 

However, going forward, this dynamic may change, and someday, you will also start your own family. This gives you less flexibility to invest a large sum. So, plan your investments accordingly. You can go heavy at present and adopt a balanced approach when you have more responsibilities. 

3. Your current debts

Debts in your 20s are typically for pursuing education or starting your own business. Based on this, you need to calculate your budget to get a suitable investment figure. There is no meaning in investing a large amount and prolonging your debt or missing installments. Even if you don’t have any existing debt but are planning to take one in the near future, do count the monthly payments before concluding an investment amount. 

4. Risk appetite and time to maturity 

These two are significant factors to consider before investing in your 20s. Risk appetite refers to the degree of risk you can take in order to earn a certain percentage of return. It can be categorized as conservative (low-risk), moderate (medium-risk), and aggressive (high-risk).

Also, time to maturity plays a critical role in deciding where you can invest. 

For example, if your goal is to save for the latest computer in the next year, it is a short period. You need to invest your money in instruments that earn you a stable income and have lower volatility, such as recurring deposits in a bank. This translates that your time to maturity and risk appetite both are lower for this financial goal. 

How to Begin Investing in Your 20s?

To make your investments worthwhile, these tips on how to invest in your 20s will help you make prudent choices. 

1. Identify your investment goals

The first step for how to invest in the 20s is to identify your investment goals. Investment goals are typical of two types: short-term and long-term.

Short-term goals have a time frame of fewer than 3 years. This includes investing to save an emergency fund, purchasing a bike, planning for a trip, etc. On the other hand, long-term goals have a range of more than 5 years. Long-term goals include saving for retirement and planning for a wedding or child’s education. You need to identify your goals before you invest your money. 

2. Research and educate yourself 

As the legendary investor Warren Buffet says, “An investment in knowledge pays the best returns.” To learn how to invest money in your 20s, you need to educate yourself on the nuances of how this space works and the factors that impact it. 

For this, you can research different financial instruments, their history, the benefits, and learn how they function. This will help you understand which investment options are best suited to your requirements and goals. This is crucial as you should know why you are choosing the assets you are investing in. 

3. Decide asset allocation based on your goals and risk profile

This is the third step towards investing money in your 20s. Based on your goals and risk profile, you need to decide where you can invest your money to get the required returns. Risk profile refers to your comfort in taking risks to receive a desired rate of return. 

For example, if your goal is to buy a car after 5 years, it means your goal is somewhat medium-term. If you have a moderate risk profile, you can invest your money in a 50:50 ratio of debt and equity to get risk-adjusted returns. 

4. Automate your investments every month

With the advent of technology, you can automate your investments to avoid any misses and instill a sense of financial discipline. Many online investment platforms offer services of linking your bank account to an investment account and, upon your consent, deduct a certain amount to invest in the instrument of your choice. 

This is easy, hassle-free, and helps you maintain consistency in your investments. An example would be to open a SIP in a mutual fund or a recurring deposit in a bank. 

5. Do not overlook the liquidy aspect

While choosing your investment options, divide them in a way that you can withdraw funds in case of an emergency. At least 20% of your investments should be done in a way that you can withdraw them without incurring any interest penalties. Alternatively, you should also focus on building an emergency fund. 

6. Don’t put all your eggs in one basket

Well, this simply means that you must diversify your investment portfolio to avoid the risk of concentration in a single asset class. For instance, if you only invest in stocks, if the stock market falls, you will lose your entire investment. Thus, you need to adopt a balanced approach and create a portfolio mix spread over equity, debt, and alternative asset classes. This will reduce your overall risk. 

7. Consult an expert 

Well, when you feel seek, you consult a doctor, right? Then why not consult a financial expert if you have doubts about your financial health? Before you make an investment decision, consult a financial advisor or planner who can help you make the right choice. Not every investment is lucrative and suitable. If you find it hard to decide where you should invest, there is no better option than to seek advice from an expert and leverage the experience and knowledge. 

Investment Options In Your 20s

Now that you know how to invest in your 20s, here is where you can actually invest your money. 

1. Equity

Equity investment options are linked with the stock market directly or indirectly. They are typically volatile and high-risk but also provide inflation-beating returns of around 10% to 12% per annum. 

For example, stocks and Exchange Traded Funds (ETFs) or Index Funds are traded on the stock exchange, and you can invest in them directly. On the other hand, mutual funds are indirect options. Not all mutual funds are related to equity, and those that are equity funds, are not direct equity investments as they act as a derivative of a certain underlying asset, i.e. large-cap funds invest in different large company stocks. 

Compared to direct equity investments, mutual funds are less volatile and, thus, a little safer for investors. 

2. Debt

Debt or fixed-income instruments are less volatile and add stability to your portfolio. They have a lower risk compared to equity and thus also offer lower returns ranging between 6% to 8%. There are different types of options in debt instruments. 

  • Bonds: They are issued by the government as well as corporations. 
  • Debt funds: They work similarly to equity mutual funds but invest in securities such as treasury bills, commercial papers, bonds, and other money market securities. 
  • Government-issued Securities: This includes Public Provident Funds (PPF), Employee Provident Funds (EPF), National Savings Certificates (NSC), and more. 
  • Others: This includes bank savings accounts, fixed deposits, recurring accounts, and post office recurring accounts. 

3. Digital assets

Digital assets include options such as cryptocurrencies. NFTs, etc. These assets are based on a decentralized public ledger called the blockchain. Digital assets are a recent addition to the investment space and are just over a decade old. Digital assets, unlike other asset classes, run on volatility and are yet to be completely regulated. Investors with high-risk appetites can invest in this asset class to earn lucrative returns. 

4. Alternative assets

This asset class includes investment options such as precious metals (gold, silver, etc.), real estate, antique items, and more. These investments are typically unconventional and offer a great degree of diversification as they are least impacted by any change in the equity segment. The return on this asset class varies, but you can expect some stability by investing in precious metals like gold or by investing in real estate property. 

Based on your investment goals and risk profile, you can select a portfolio mix that includes all these asset classes and grow your money over the years to build wealth. 

Remember that investing from an early age gives you the space to add assets giving higher returns in your portfolio and still avoiding risks. It also reduces your monthly investment requirements as you have a longer maturity to achieve your targets. 


We hope that now you have got the answer to how to invest in your 20s. Investments are key to creating wealth and living a financially independent life. Even if it is just a thousand bucks every month, invest. Your small contribution will grow and compound with time. Think of it as, “Someone’s sitting in the shade today because someone planted a tree a long time ago.”


1. How do I get started investing in my 20s?

You can start investing in your 20s by first analyzing your existing financial condition and deciding your financial goals and risk appetite. Once you decide that, you can conduct your research and narrow down the investment options that suit your requirements. The key lies in being consistent with your investments and investing, even if it is a small amount. Your money will compound and give you better returns.   

2. How much should you invest during your twenties?

There is no particular answer to this question. How much you can invest depends on your income inflow, outflow, and existing debts. You need to start investing every month, even if it’s only Rs. 500 or Rs. 1000. You can automate your investments, too, to stay consistent. 

3. Should I invest aggressively in my 20s?

The answer is yes if you do not have any other responsibilities than yours and there are no outstanding debts. If you have the flexibility, you can invest aggressively in your 20s. As you grow old, you may have more responsibilities on your shoulder; thus, the 20s is a perfect time to focus more on the investment part.

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