Best assets to buy in your 20s

What are the best assets to buy in your 20s?

The best assets to buy in your 20s include S&P 500 index funds, retirement plan contributions, REITs, rental properties, inexpensive housing, education, and businesses. Wealth is built by earning a high income and investing in appreciating or dividend paying assets. Investing in your own education will help you identify and evaluate wealth building opportunities.

Imagine, buying as many assets as you can in your 20s. Your smart investments will allow you to retire in your 30s or 40s, well ahead of most individuals.

You can set yourself up for life by using your 20s effectively.

Luckily for you, I’m going to show you the best assets to buy in your 20s. These assets are some of the most proven ways to build wealth for the long-term. You need to identify which assets meet your investment criteria and start purchasing!

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What are the best assets to buy in your 20s?

The best assets to buy in your 20s are assets which appreciate in value or pay cash flow through dividend payments. You can contribute to your retirement plan, invest in the S&P 500, REITs, rental properties, or start your own business. Investing in your own education and owning your own home can be a good investment as well.

Investing in your 20s takes advantage of compounding interest. Compounding interest is when your money is invested and begins to make you more money, year after year. The first year you invest $100, then worth $110 the next, and then $121 the following.

Most investors either choose to invest in appreciating assets, cash flow, or a healthy mix of both.

For example, you could buy a stock which appreciates in value over time. At retirement, you have $1,000,000 invested. Should your investments increase by 10%, you can withdraw $40k for yearly income and have $1,060,000 remaining.

Alternatively, you could invest in cash flow assets, like REITs or Dividend stocks. A $1,000,000 portfolio may have a 5% dividend yield. Every year, your portfolio produces $50k in cash flow passively. Additionally, your $1M in principle can still take advantage of appreciation.

Some investors have a certain split of assets which focus on appreciation or dividends. For example, you could split 50/50 to take advantage of cash flow and appreciation. You have to determine which style of investing works for you.

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S&P 500 index fund

The S&P 500 is one of the most common investments for new investors. An S&P 500 index fund invests in the United States top 500 companies, making it a reasonably safe investment. Over the last 10 years, the S&P 500 has returned an average of 13.6%.

Over the long term, the S&P 500 has continually produced positive returns. While past performance is never a good indication of future, the S&P 500 is seen as reasonably safe. Your investments in the S&P 500 should be worth more in the future.

However, you should choose a low-cost S&P 500 ETF, like VOO for investing in the S&P 500. Exchange traded funds like VOO track the performance of the S&P 500 and make it affordable for most investors.

You should be aware, not all S&P 500 ETFs are created the same. Some charge large expense ratios or fees for managing your money. VOO only charges 0.03% as an expense ratio, which is cheap compared to other funds charging 1% or more!

Retirement plan contributions

Your retirement plan can be one of the best tax sheltered investments. Always invest enough to meet your company’s retirement match. You can always open an individual retirement account or IRA should your company not have a 401k plan.

Most companies offer a dollar for dollar match up to a certain percentage of your salary. For example, your company is offering a dollar for dollar match on the first 6% of your $50k salary. Therefore, the first $3k you contribute, your company will instantly match $3k.

Company matches are a 100% instant return on investment!

The major downside to any retirement plan contributions is the accessibility. You can’t access your money until you’re 59.5 years old. This can be a major downside if you plan on retiring early.

Inexpensive home

Owning your home can be a worthwhile investment. Your home should appreciate in value while it builds equity. Eventually, your home will be paid off, which means you no longer have to pay for a place to live.

Keep in mind, you shouldn’t purchase too much of a home. Homes can negatively impact your finances if you borrow too much money. Therefore, always look for a modest first home and avoid borrowing more than you can afford to pay back.

Remember, the best way to build wealth is to purchase assets that can support your lifestyle. Paying too much on a home can take away extra money you could be using to invest.

Continued education or courses

The reason most individuals are stagnant in life is because they stop learning or trying to improve. Most people work a job without any direction to where they want to go in life. Educating yourself opens your mind to new ways of thinking and the ability to recognize opportunities.

Most people work a job until they hit retirement age. They never planned their retirement or understood they could have retired early with the right plan. Simply accepting the way things are will never help you build wealth or grow as a person.

Spend some free time learning.

Learn from YouTube videos, podcasts, books, or blogs. Make learning a priority and spend time every day learning something you’re interested in. Personally, I recommend learning about personal finance so you can reach financial independence early.

When you reach financial independence, you no longer have to work. You may choose to work, but you’re working on your own terms. Alternatively, some people take a lower-paying or lower-stress job when they reach financial independence.

Maybe you want to learn how to trade stocks which can greatly boost your income. You could buy a digital course and learn stock trading.

Real Estate Investment Trusts

Real Estate Investment Trusts (REITs) are investments in companies who invest in real estate. REITs are required to pay out 90% of their profits in the form of dividends back to shareholders. Therefore, REITs are a good income generating asset to hold in your portfolio.

REITs are traded like stocks on the stock market. You’ll need a brokerage account with a company like Robinhood if you want to buy and sell REITs.

You can also find REIT exchange traded funds like VNQ which can increase your diversification. Purchasing a REIT ETF instantly diversifies your portfolio by investing in hundreds of individual companies.

Rental Properties

Rental properties can provide home appreciation as well as income through rent payments. Investing in rental properties can be risky and very hands on. You should be the type of person who doesn’t mind getting their hands dirty to fix up a place when needed.

Alternatively, you can purchase a rental property and hire a property manager. The property manager will charge a fee, but they’ll fix problems and maintain the property. Make sure you factor in the cost of a property manager before you buy the property.

Your own business

There is no faster way to accumulate wealth than to start your own business. Entrepreneurship can provide you with unlimited income potential, beating any raise you get from a corporate job. Most successful businesses start out as a side hustle and then grow into your full-time gig. 

For example, you might start your own dog walking business. You walk dogs and make a decent side hustle income. Eventually, you have enough clients to walk away from your full-time job and focus 100% of your efforts on new clients.

Businesses can be scaled to increase your income as well. You can hire employees to walk dogs for you. Now, you can walk dogs if you want or let your employees do it. Either way, you’re making money because you’re the owner.

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Summary: Best assets to buy in your 20s

As you can see, there are plenty of assets you can buy or build in your 20s. Assets typically appreciate in value or pay cash flow in the form of dividends. You can build your portfolio to focus on cash flow or appreciation or build a healthy mix of both.

Examples of assets include S&P 500 index funds, retirement plan contributions, REITs, rental properties, inexpensive housing, education, and businesses.

Education is a different kind of asset. The more you learn, the more you increase your earning potential. You can more easily identify good investment opportunities and develop critical thinking skills.

Personally, education is my favorite asset because it sets you apart from the mundane. Everyone around you accepts life as-is, but critical thinking skills let you think outside the box. You can retire by 35 with the right plan, so why is everyone else retiring at 60?

Owning your own home doesn’t always provide a cash benefit. However, you build equity which can be liquidated eventually and your home should appreciate in value. Additionally, owning a home allows you to live for free, with the exception of property taxes.

John is the founder of TightFist Finance and an expert in the field of personal finance. John has studied personal finance for over 10 years and has used his knowledge to pay down debt, grow his investment portfolio, and launch a financial based business. He is committed to sharing content related to personal finance based on his experience in his career, investing, and path towards reaching financial independence.