How long do you want to wait for financial freedom?
Today’s retirees are around 62 years old, on average, but if you’re currently in your 20s, research shows a bleak picture. The estimated age Millennials and Gen Z workers are expected to retire is 75 years old. Considering the average life expectancy is 84 years, that leaves only nine twilight years to enjoy financial independence. Ouch.
If those numbers sound depressing, don’t worry, there’s still time to build wealth now and enjoy financial independence before old age. By taking the time to invest in assets now, you’ll be in on the key to wealth that compounds over time, giving you the chance to experience financial security now and financial freedom later.
This post will discuss the top four assets you should invest in during your 20s and give you some tips for pulling together the cash to buy them.
Should You Buy Assets in your 20s?
You may be thinking, “I’m still young; there’s plenty of time for me to invest later.” This is true - you can start investing at any age, but the fact is that the earlier you start investing and buying valuable assets, the more wealth you’ll have the opportunity to build. It also sets you up for more success and stability because it grants you the benefit of having multiple income streams.
Having multiple income streams is exactly what it sounds like - you have the ability to gain income from more than one source. This process not only helps you build wealth more quickly, but it also gives you a bit of a safety net - something to fall back on if one of those income streams fails.
Tribevest helps investors in their 20s get off on the right foot every single day. We’re passionate about group investing and creating wealth-building opportunities for all. We’ve seen the investing opportunities that work best for your age group, and we’ll share those secrets with you here. Let’s dive into our top tips for building a foundation for financial freedom in your 20s.
1. Foundational Investments
First, let’s talk about some foundational investments you should start out with: Stocks and bonds.
Stocks and bonds aren’t flashy or exciting, but you should still take the time to learn them and understand them in your 20s. Invest in a retirement account like a 401K or an IRA, purchase stocks you believe in, and learn how the market works.
The trap many investors fall into in their 20s is putting all their investable capital into stocks and bonds. In reality, you should allocate only about 50% of your portfolio to traditional investments like stocks and bonds.
Another asset you may want to consider is cryptocurrency. Cryptocurrency is popular, especially with younger investors, but beware: You shouldn’t dive into any investment blindly, and crypto is no exception.
One note about cryptocurrency is that the market evolves far more quickly than most other investment markets. You should only invest in cryptocurrency if you’re prepared to keep up with the changes in the market.
We also recommend investing in cryptocurrency socially. You can engage with social media communities like the ones on Reddit or build a tribe on Tribevest and learn the ropes of cryptocurrency together with friends. Regardless, we don’t recommend going it alone with crypto off the bat.
2. Find a Cash-Flowing Investment
Once you have some baseline investments lined up, the next asset to buy in your 20s is a cash-flowing investment.
If you want to build wealth, relying on one standard W-2 job isn’t going to cut it: You’re going to need multiple streams of income. The earlier you begin building those alternative income streams, the earlier you can achieve financial stability—and, eventually, financial freedom.
Most of the best cash-flowing investments are alternative investments. What are alternative investments? Any investment that isn’t a stock or bond.
One incredible cash-flowing investment option is real estate. Like many people in their 20s, you may not be in the position to purchase a home where you live. Depending on your location, purchasing a home in your area might not be a good financial decision. Just because you can’t afford property where you live doesn’t mean you can’t afford property anywhere, though!
You may also want to consider buying property with friends. By pooling your resources with friends, you’re more likely to be able to afford a high-quality property that can generate meaningful income for your whole group.
Explore properties in affordable areas. Rent out this property either as a long-term rental or a short-term rental on sites like Airbnb or VRBO. If you can’t afford an income property at all, you can even consider renting out a room in your apartment or home for additional income.
3. Invest in a Start-Up Business
Another investment you should make in your 20s is a start-up business. Why should you invest in a start-up? Simple: The opportunity for explosive ROI is incredible.
Even if the start-up you choose to invest in isn’t the next Amazon, investing a small amount of capital in a business that ends up finding moderate success can have massive returns for you down the road.
How can you invest in a start-up? There are a few different methods you can use:
- Be An Angel Investor: This option is best if you know the founder of a start-up business you feel passionate about supporting. You can engage with a start-up in the form of a convertible note, offering funding in return for equity in the company.
- Explore Crowdfunding: Don’t know anyone starting a business you want to invest in? Explore crowdfunding instead. You can invest through sites like SeedInvest or WeFunder even if you only have a few hundred bucks to spare.
- Work With A Venture Capital Fund: To work with a Venture Capital (VC) fund, you must be an accredited investor. You can invest in start-ups through a VC fund if you have enough capital to reach their minimum investment qualification. This qualification depends on the fund and the investment.
4. Invest in Your Own Business
Another investment you should pursue in your 20s is yourself. No, we don’t mean that in a corny believe in yourself way: We mean literally.
You don’t necessarily have to start your own business in the traditional sense, but your 20s are a great time to lock down skills, talents, and hobbies that might be able to provide you with an additional income stream.
To be clear, we’re not saying you should quit your day job—in your 20s, you should focus on building wealth and stability wherever possible, and holding down a stable job is likely going to be a big part of that plan (for now). But working a day job doesn’t mean you don’t have additional marketable skills you can benefit from!
Do you have an area of expertise you can leverage by freelancing? Maybe you’re into the visual arts: You might want to consider selling products on Etsy or selling your digital artwork as NFTs.
Essentially, the name of the game in your 20s is to produce as many income streams as possible. If you can leverage a hobby that you love into some extra cash, that’s a win-win!
Getting the Capital to Buy Assets in Your 20s
No matter how much you agree that investing in assets like real estate and start-up businesses is a good idea right now, it’s difficult to move forward if you don’t have the capital you need. Thankfully, there’s a simple solution: Tribevesting.
Alone, you may not have the funds handy to purchase an income property… but what if you pooled funds together with four like-minded friends? By investing together in a group, you and your friends will be able to access assets you wouldn’t be able to afford on your own, making it easier to build wealth. We recommend investing 20% of your capital with your tribe to build the most wealth.
Investing with a tribe has more than financial benefits. Group investing can provide experiential learning. With the help of your tribe, you can learn new asset classes, spread your risk, and level up to new investing methods.
Tribevest provides the platform, resources, and support you need to invest in assets with friends or family without damaging your relationships. We’ll help you with every step of the way from aligning your tribe to forming and filing your LLC, to pooling your resources and pulling the trigger on your first investment together. Get started and build your tribe today!