How should a person in their early 20's invest their money?

The important part of investing money is to first earn the money and then save the money for investment. This is the time when you understand the importance of investments, returns, and savings. 

People in the 20s slowly start taking responsibility for their own life because education is complete now and they have started to earn and investing money is the best decision. Before understanding how a person should invest, one must first understand why a person should invest. 

If you know why you must invest then you will surely find the best investment that will give you huge returns. The two common reasons available regarding investments are: 

• To generate wealth for the future so that one can retire early. 
• To save taxes and beat inflation.

Investment is an Art that needs proper planning. A good part of your earning goes towards fulfilling the basic needs of the individual. It will take up around 50 percent of the salary. So, you are left with 50 percent of your income now. Now you can devote 20 percent of your income to Discretionary expenses that are also known as “For having fun” expenses. The rest 30 percent must go for your savings and investment. Now when you have decided how much you are going to save for investment then comes planning your short-term and long-term investment plans. 

Long term investment Plans

For long-term investment plans, you can go for ETF and ELSS fund that gives you tax benefits under section 80C. 

Apart from ELSS, you can go for PPF, NPS that will also help you save taxes but ELSS has given superior returns over others and this allows you to build your long-term wealth through investments. 

Short term investment Plans

This type of investment is done to meet your short-term goals. The goal may include buying a car, paying an education loan, or any other important thing that you want to have in your near future. To meet your short-term investment goals, you can go for Fixed Deposits which are less risky and gives you a fixed rate of return on your investments.

Investment in Stocks is a great option and it has outperformed the other investment options over the long term. Investment in Stocks comes with a risk, but a calculated risk has helped people to generate wealth. 

At an early age, one must buy life insurance and health insurance because the sooner you understand the importance of insurance, the cheaper it will be for you. You must understand that there are people, right now, or soon that will be dependent on you and you will be doing this for them. 

One must understand that it will take years to build your emergency fund but only one visit to the hospital can blow your emergency fund and it is great that companies provide you the health insurance and you still get a cover. 

Diversification is the key to investment and patience and consistency are the important aspects of investment. Never act because of greed or fear in the market. If you can control your emotions, then you will create wealth for yourself with consistency. Avoid making random investments instead know in-depth about your investments. This approach will take you far. Stay Invested and Consistent.