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How Should I Invest In My 20s?

Home » Windward Passages » How Should I Invest In My 20s?

How Should I Invest In My 20s?

Posted on: April 14, 2016

Author: Brent Lemieux CFA® CPA

Like the answer to so many other questions, it depends.  In order to determine how the money should be invested, and if it should be invested, we need to ask ourselves three main questions:

  1. What am I saving for?
  2. What does my debt situation look like?
  3. Do I have an adequate “safety net”?

What am I saving for?

Before investing, it is important to clarify your goals.  How and when you plan on spending the money can make a huge difference in how it should be invested.  If you have some cash that you plan on using for a down payment on a house in two years, we recommend investing that money primarily in safe, fixed income assets.  However, if you are saving for retirement, you have quite a bit more time to recover from a market downturn.  Because of this, your portfolio may contain a much higher proportion of diversified equities.  Of course, it’s entirely possible to save for these two goals at the same time.

What does my debt situation look like?

It may be worth considering paying off any debt before investing.  This decision depends on a number of factors, including:

  1. The interest rate.  How much are you paying to service the debt?  If this number is high, it’s probably best to pay off the debt first.  See this post for a more in depth discussion.
  2. Your rate of return on investments.  What can you reliably earn on your investments?  If this number is higher than the interest rate, it may make since to invest and pay off the debt simultaneously.
  3. 401(k) matches.  If your employer matches your 401(k) contributions up to a certain level, it may be wise to contribute up to that level to avoid leaving money on the table.

Do I have an adequate “safety net”?

Whether you begin saving and investing for a goal, or paying off debt, we always recommend starting with a cash reserve.  A cash reserve protects you from financial hardship in the event that you lose your job or incur a large expense.  A typical rule of thumb is to hold six months’ worth of essential expenses in a cash savings account.  However, depending on the stability of your job, this number may be different for you.

If you’re interested in advice specifically tailored to your situation, contact us today!

 

This blog is provided by Windward Private Wealth Management Inc. (“Windward” or the “Firm”) for informational purposes only. Investing involves the risk of loss and investors should be prepared to bear potential losses. No portion of this blog is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Certain information contained in the individual blog posts will be derived from sources that Windward believes to be reliable; however, the Firm does not guarantee the accuracy or timeliness of such information and assumes no liability for any resulting damages.

Windward is an SEC registered investment adviser. The Firm may only provide services in those states in which it is notice filed or qualifies for a corresponding exemption from such requirements. For information about Windward’ registration status and business operations, please consult the Firm’s Form ADV disclosure documents, the most recent versions of which are available on the SEC’s Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov.

Filed Under: Building Wealth, Getting Started, Investment Planning, Recent Posts, Retirement Savings & Income Planning

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Windward Private Wealth Management Inc. is an SEC registered investment advisor. Past performance is no guarantee of future results. All securities involve risk and may result in a loss. *We do not provide legal services. These services are rendered at client request in coordination with legal counsel. Legal services will be billed by the provider and are separate from our fees. We do not sell insurance products. These products may be purchased at client request in coordination with insurance agents. Insurance agents are responsible for recommendation of all insurance products. Windward does not guarantee the performance of any insurance product purchased.
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Our last day at 2101 Burlington is 1/27/2023. Our new office is being renovated and will open between 2/15-3/1/2023. Our new address will be: 851 NW 45th St., Suite 106 Kansas City, MO 64116