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Should You Manage Your Own Investments in Your 20s?

27 July 2019 No Comment

As an enterprising twenty-something millennial, it’s a reality that many wish to blaze a path and go it alone. This is evidenced in the number of entrepreneurial twenty-somethings and the growth in remote working where they don’t wish to be tied down. How does this affect their attitude to investments for the typical male or women in their 20s? It’s an interesting question. To answer it, let’s consider self-management of investments and whether that’s sensible for a twentysomething.

Slow Going in the Early Years

When fresh out of college or jumping straight from high school into the workforce, the salary is usually quite low. If there are college loans to pay off, then that’s adds a drag factor too. Nevertheless, usually twenty-somethings experience wage increases into their late 20s as their career blossoms and they begin to see the financial wood from the trees.

This thinking is borne out by the known balances of checking and savings accounts of Americans which has been broken down by age group. For people under 35 (the lowest age group included) by the Federal Reserve in their survey last conducted in 2016, the average balance was just $2,600. Even the median across the U.S. population isn’t much higher than this. Clearly younger people are struggling to amass enough assets to invest.

Better Financial Education and Good Practices Matter

As we promote on this site, financial education of millennials makes a huge difference when it comes to achieving a better outcome. This means learning how to create a spending plan (or budget) and to stick to it fairly closely i.e. to save first and spend what’s left (not spend first and save the crumbs that remain at the end of the month).

Beyond that, reading books on managing money is invaluable. Books such as “Bogleheads” and “The Four Pillars of Investing” are excellent resources. While you may decide to have a financial planner manage your assets eventually, understanding the basics about both investing and investment products is a great first step. This way, it’s possible to talk knowledgeably about it and follow what is recommended.

When Hiring a Financial Planner is Smart

In your twenties, focusing on improving a young career is going to pay dividends at that time. Trying to manage investments in the evening and weekends doesn’t make much sense. Instead, pursue career advancements or even a side hustle to boost your monthly income to afford to invest more into a portfolio.

When you have sufficient assets that are growing at a steady pace either through market price increases or new regular contributions, then that’s a good path to be on. A financial planner in Minneapolis can look over what you’ve done so far and make recommendations on how they can improve upon it.

It would seem to make sense to work with a financial planner in your twenties if there are sufficient financial assets. In the meantime, improving the management of money and learning about the stock and bond markets through reading will be extremely beneficial in the long run.

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