What is the best way for someone in their early 20s to start making small, low-risk investments?
I am looking to invest $1,000.
Answers | 1
The first place to look is your work place. If they offer a 401(k) or other retirement plan, take advantage of it. Find out if they offer any matching contributions. If so, a great starting goal is to contribute as much as you can to get the full employer match. If you do not have a plan at work, consider an IRA instead.
Of course you can also invest in non-retirement accounts. Consider a low cost brokerage account. You will not get a tax deduction on the amount invested, but you will be able to access it before your reach the age of 59½ without incurring a 10% penalty.
Next, a great way to start is to set up an automatic debit or deposit on a regular basis. For example, if you can afford $100 monthly and set it up automatically, you will take advantage of "dollar cost averaging".
If you are investing on your own, consider low-cost index funds. While you do take on the risk of the general market, you are still more diversified than purchasing individual stocks. For more specific investment suggestions matching your time horizon and risk level you may want to consult with a financial advisor.