Investment strategies you should adopt in your 20s

Starting out in your twenties, you may begin to experience the pressure to attain financial independence. This is because, as a young and energetic individual, you are determined to make the best of your youth as the financial decisions you make at this stage of your life could potentially make or mar your future.

While seeking independence and trying to find your feet in this fast-paced and technology-driven world, you may find yourself dealing with many expenses as well, hence why the song, “Adulthood Anthem” by Lade now ranks #30 of the top 100 music chart in Nigeria on Apple Music, as many in their 20s can obviously relate to the hardships and pressure you feel when navigating this stage of your life. As such, you would need funds to meet your ever-increasing expenses and have enough funds to set some aside for your future.

In this regard, you may seek a means to generate wealth over time, pushing you to consider investing in stocks, cryptocurrencies, bonds, real estate, and other types of ventures. However, investing can be highly risky and volatile. As such, you should adopt the best strategies to attain the best results to minimise loss and maximise profit. Here is a look at what our experts are saying about investment in this stage of your life, what strategies to adopt and what investments should be your focus and on your watchlist:

What experts are saying about investing in your 20s

Olumide Adesina of Quantum Economics opined that investment in your 20s should be focused on growth-oriented assets. He further explained, “Investments in your 20s should be mostly in growth-oriented assets. This is based on the sentiments that growth investments offer far larger rates of return than safe, interest-bearing assets do over the next decades due to compounding.

“In addition, at least three months’ worth of living expenses should be covered by the funds you save in an emergency fund. This provides you with a financial safety net in case you lose your job or are slammed with a string of unanticipated bills. Another benefit of having an emergency fund is that it will prevent you from selling your investment holdings.”

Opeoluwa Dapo-Thomas, an International Financial Analyst, spoke on three investment strategies people in their 20s can adopt. He explained, “When it comes to investing for younger people, there are possible strategies to be deployed – We can talk about three possible ones. First, it’s Value averaging – an investment strategy that would increase the total value of an investment over time. The investor monitors the price of assets to ensure that he gets the best value over a certain period of time.

“The popular, Dollar Cost Averaging, this strategy would help the young investor buy assets when the price is low and sell when the prices are up. This strategy can be compared to a discount sale. And then the lump sum investment- This investment strategy involves investing all or a very large percentage of your investable capital at once. This strategy is described as a hands-off investment strategy.”

He concluded by stating, “So 20-year old’s should use the most valuable currency they have which is time. The markets would always grow because companies grow and scale. Patience is indeed a virtue in the market.”

Ugo Obi-Chukwu, the founder and lead analyst at Nairametrics, explained that investments in your 20s should be on the basis of individual financial goals. He explained, “In your twenties, your investment strategy should match your financial commitments. For young people it is; Accommodation, Car, Clothing, Saving for post-graduate education and Dependents.

“Based on this, investment should be aggressive with returns way above inflation. Young people should allocate a sizeable portion of their investment in Eurobonds or dollar-based investments such as US equities. This helps fund further education, vacation etc.

“They should also invest in the Nigerian Stock Market with a focus on stocks that have a track record of delivering capital appreciation. Income from here should help meet number 2 (car).”

He further stated encouraged young people to start businesses. He stated, “Invest in a business – perhaps the most lucrative form of investing. Taking a stake or owning a side business that generates significant revenue for you is a holy grail of investment decisions. Start with something you are passionate about. You don’t need to run it alone or at all. You can co-own it with a partner. Most founders you know have angel investors who are friends and families.”

He concluded by giving his two cents about young people and investing in the real estate space. He explained, “Real Estate might be an expensive investment for someone in their 20s. However, if you get your first bonus, it might pay you to sink some of the income in real estate. Even if it is landed property. You don’t have to cough out the entire money. Join a cooperative or work with friends to own something you can go on to sell at a nice profit years later. Just make sure you conduct a very good market survey and buy from an area with potential to appreciate in value.”