Thu Aug 15 2024, by Tyler Gardner

Investing $10,000 in Your Twenties

Here is exactly how I would invest $10,000 in the stock market if I were in my twenties. I'm Tyler, a former financial advisor and portfolio manager, and now I create financial content for free to help you navigate your investment journey.

1. Start with a Roth IRA

I would invest $7,000 within a Roth IRA. In a Roth IRA, 100% of your gains, anything you earn on those investments, is 100% tax-free after you turn 59 and a half. Additionally, you can treat the Roth like an emergency fund because any money that you put into a Roth can be taken back out at any time for any reason, penalty and tax-free.

2. Automate Your Investments

I would break this $7,000 into two bi-weekly payments of $269 throughout the year. Automating your investment in a low-cost aggressive growth fund, like Vanguard's VUG or Invesco's QQQ, ensures that you invest both when the market is up, capturing momentum, and when the market is down, buying stocks on sale.

3. Invest in a Taxable Brokerage Account

The remaining $3,000 should be invested in a taxable brokerage account, specifically in a low-cost index fund that tracks the S&P 500, such as Fidelity's FXAIX. This approach allows you to take advantage of decades of compound growth and enables you to sell those investments anytime after one year, resulting in a significantly lower tax rate compared to ordinary income.

Conclusion

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