Mon Jul 01 2024, by Tyler Gardner

Smart Investing Strategies for Your 20s and 30s

If I were to invest $1,000 in my 20s or 30s, here's exactly how I would do it and what I would invest in.

I'm Tyler, a former financial advisor and portfolio manager, now dedicated to sharing financial knowledge for free so you don't have to pay for it.

1. Utilize Tax-Advantaged Accounts

I would make sure to do all this investing in a 401(k) or a Roth IRA. Both of these accounts offer major tax advantages: 401(k) allows pre-tax contributions now, while Roth IRA provides decades of tax-free compound growth.

2. Invest in U.S. Total Stock Market Fund

I would invest 40% of the $1,000 into a low-cost U.S. total stock market fund like Vanguard's VTI or Fidelity's FSKAX. These funds offer diversified options to invest in some of the most stable and profitable companies in the United States.

3. Diversify with International Stock Market Fund

Next, I would invest 20% of my assets in a low-cost international total stock market fund like Vanguard's VTIAX. This investment provides exposure to developed economies like Japan, the UK, and Germany, as well as emerging markets like China, India, and Brazil. It diversifies my portfolio and serves as a long-term currency hedge against the decline of the U.S. dollar.

4. Include Real Estate with REITs

I would then invest 10% of my assets into a real estate investment trust (REIT) like Vanguard's VNQ. This is the easiest way for someone just starting out to gain exposure to real estate without being a limited partner, landlord, or homeowner.

5. Allocate to Total Bond Market Fund

Finally, I would invest the remaining 30% of my assets into a total bond market fund like Vanguard's BND. While this may seem conservative for a young investor with a long-term horizon, it's essential to understand your risk tolerance by experiencing market downturns. You can always reallocate some of this 30% bond into equities as you get more comfortable with risk in your 30s.

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