One of the best things about being young is having an incredibly long time horizon for investing. If you can make the right investment decisions early on, you can ensure that you are prepared financially for nearly anything that comes your way in future years.
In this article, we are going to look at some of the things that you should consider investing in to reach maximal returns by the time you hit retirement.
Option #1: Market Index Fund
Generally speaking, the market always goes up over time. This means that, assuming you have a portfolio of stocks that is well diversified, you will be able to catch most of the stock market’s rise over the years.
As a young person with a lot of time, you can stand to leave your money invested through the ups and the downs of the markets over the next 20+ years. So, you could always choose to just buy the entire market. This is accomplished by buying a market index fund like the S&P 500 Spider ETF (SPY).
By buying this fund, you will get exposure to every stock that is in the S&P 500 through one avenue. If you choose to, you can simply re-invest the dividends that you get from this fund to buy more shares in the future!
Option 2: Target Date Funds
Many mutual fund companies are now selling something called “target date funds”. These are a selection of stocks and bonds that are set to give you a good return by the targeted date that you need them.
For example, do you know that you’re going to need your money in five years? If so, you could buy a target date fund for 2023! Or, if you don’t need your money for 40 years, you could buy a target date fund for 2057! You can learn more about the benefits and cons of target date funds with this article from BankRate!
Option 3: Invest with a Robo-Advisor
Finally, if you don’t even want to think about investing and would rather leave that to someone else, you could always invest your money with a robo-advisor like Betterment or Acorns. These companies take the hard work out of investing and charge you a small yearly fee to invest your money for you. All you have to do is set up a recurring investment and come back many years down the road to collect.
The options for how you can invest at a young age are plentiful, you just need to determine a couple of things:
1) Do you need the money from your investments sooner or later?
2) How much risk are you willing to take on for good returns?
3) Would you rather invest the money yourself or have someone else do it for you?
Answer those three questions and it will help you determine which investments to make in your current situation. It is always better to start sooner rather than later!
David Milberg is an experienced credit analyst in NYC. He is a long-time owner of Milberg Factors, a factoring and finance company with locations in New York, California, and North Carolina.