“Compounding is the 8th wonder of the world”. It is a well-said quote by the world’s most famous investor Sir Warren Buffet, and it signifies the power of compounding and compounding needs time.
So if you are in your 20s, then it is the best time to invest in some assets because they grow over time and give you financial and mental freedom. In this post, we will discuss some such assets in brief.
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Assets in which you should invest in your 20s.
#1 Good company stocks (Index Funds)
The stock market is the best long term investment to make because it generates past income by following the principle of compounding.
You just need to identify promising companies and buy their stocks; afterwards, time and compounding work for you. If you are a beginner and do not know how to choose good companies, you should invest in index funds. Afterwards, you can gain stock market knowledge by reading books like The Intelligent Investor.
Intelligent Investor Buying Link- https://amzn.to/3EFLW66
In the beginning, learning is more important than earning. If you do not have proper knowledge about any financial topic that you think can positively impact your life, you must learn it because you are in your 20s and your lot of life is left. Anything you learn today will help you for the rest of your life. So start reading books and gain financial knowledge.
Which book to read?
It will be difficult for you to find the best finance books. To solve your problem, here is the list of the best finance books to read:
#1 Rich Dad Poor Dad
This is the first book I read. Believe me, and it is one of the best finance books.
Amazon Purchase link- https://amzn.to/3FHAoAv
#2 The Unemployed Millionaire – Escape the rat race, fire the boss and live your own life.
In this book, Matt Morris discuss how he made millions without spending a penny. You should definitely read this if you do not have any initial investment.
Amazon Link- https://amzn.to/3eyysOP
#3 How to earn $100,000 per year in Passive Income and travel the world
This book will discuss some of the best and proven passive income strategies.
Amazon Link- https://amzn.to/3eQPIiN
#4 The Power of Passive income
This book will tell you the best way to escape 9-5 rat race and help to become financially independent.
Amazon Link- https://amzn.to/31beCq3
#5 One thousand ways to make $1000
This book is recommended by the god of investor Mr Warren Buffet. Buffet made his first $1000 by implementing some ideas of this book.
Amazon Link- https://amzn.to/3pDHxwl
There are many more good finance books. But this five-plus The Intelligent Investor is the best of the best. That’s why you should utilise your time in reading them.
#3 Cheap land or building
The land is one of the safest assets to invest in because, in 90% of cases, it will give you a positive return in the long run. But if you want to earn huge returns, you need to buy from the right person who can sell you the right property at a low price.
Who could be the right person?
#1 A Person who urgently needs money
A person in an emergency and needs money will sell their property at an extra discount. Generally, people sell their property to meet emergency health expenses.
#2 Seized properties by banks
When a borrower fails to repay a loan, the bank seizes its property and sells it at a discount price to recover its money at the earliest.
#3 Divorced females
Many females get some land or other real estate property as compensation for divorce. Afterwards, they generally marry another person and shift to his house. So she sells her property at a discount to fastly cash out money.
People who decide to live in another country quickly sell their property by giving heavy discounts.
You can buy the property at low prices from the four categories mentioned above of people.
Apart from that, there are many things like the right location, right price etc., which you need to consider before investing in it. Also, real estate requires enormous investment, so I recommend you to read The Book On Rental Property Investing: How To Create Wealth And Passive Income Through Intelligent Buy & Hold Real Estate Investing! which is one of the best books for real estate investing.
Amazon link- https://amzn.to/3mKDrk1
I already mentioned, health emergencies made people sell their properties, and it is obvious you do not want to face this situation. Health insurance, fire insurance, vehicle insurance etc., are some of the insurance you should take to avoid massive losses.
It sounds funny, but some people’s health insurance is a waste of money because they do not get a chance to claim it for the last few years. It is the stupidest thing I’ve ever heard because one can only claim health insurance if they fall sick. Now tell me, do you want to spend your precious time just lying on the hospital bed?
The answer is a big No. You should be grateful to God that you did not get any chance to claim health insurance. If you fall sick, you can claim health insurance and avoid a huge financial burden.
So start investing some of your earnings towards insurance to avoid sudden abnormal loss.
#5 Practical experience
You are currently a young and energetic youth. You can take risks and try out new things, which will give you the ultimate practical experience.
For example: If you are thinking of starting a business, then make a proper plan and do it. Avoid some common mistakes and try your best to make them succeed. Don’t give up; stand again with more energy if you fail. The more you fail, the more you get to know about the business, and one day you will succeed. That day you will gain the essential skill, which is patience.
Believe me or not, whatever you will do in the future needs patience and a never-give-up attitude, and it is best to develop it in your early 20s.
Other Assets to buy
If you want to play safe, you can consider buying government bonds. Bonds are simply a form of loan you give to the government or any other organisation. In return, it promises you to pay a fixed interest rate over some time and the bond amount on the date of maturity.
Merits of Bonds
# Safe Asset
Bonds are generally issued by the government or any other trusted organisation, making them relatively a very safe asset.
Also, the bond is a charge against an asset, which means you will get the right over the assets of the bond issuing organisation if it fails to pay off your money.
# Fixed rate of interest
Rate of interest in bonds is fixed, which makes it risk-free.
# Long term returns
Generally, bonds are issued for the long term, like 10-20 years, which means you will get long term returns.
Demerits of Bonds
# Low-interest rate
Generally, the interest rate in bonds is meagerThe rate (about 2-3%) is the principal disadvantage of buying a bond.
#2 Preference shares
It is a type of share in the stock market where the investor gets a fixed dividend rate. Preference shares have some preferences over equity shareholders, making it a safe investment.
Generally, companies pay 3-4% dividends to preferred shareholders.
What should you do as a beginner?
If you are a beginner, invest in index funds and start gaining finance knowledge. Once you have significant knowledge, you can invest in other assets in your 20s.
Now comes the end of this article. If you have any doubt, then feel free to ask me in the comment section; till then, GoodBye, and as always, God Bless You All.
Frequently Asked Questions
Why are index funds better for beginners?
Index funds mean investing in multiple companies at a time which reduces the overall risk.
Who sells their properties at low prices?
Generally, divorced females, people in health emergencies, migrants etc sell their property at cheap prices.
Why should I take health insurance?
Because health insurance gives you an opportunity to avoid heavy health expenses.