Invest in Index Funds
If you are a young investor, then you have to make sure that your investments are entirely focused on growth assets. This is because you have decades ahead of you and you can easily take advantage of things such as compounding interest or even a higher return rate on your investment. Even though the stock market might be somewhat volatile this year, stocks are still actually a good choice if you are young. You can take advantage of the low prices for top stocks and you also have plenty of time to weather any storms that may come your way.
Invest in Real Estate
Investing in a real estate investment trust is a fantastic way for you to hold a portfolio that is full of commercial real estate. Believe it or not, this can be much more valuable when compared to holding a single property. The main reason for this is because you will be invested in different properties that are spread across a wider geographical location. That gives you a much greater level of diversification and it also means that you have less risk when compared to a single property. Another huge advantage here is that you can do this with just a few thousand. Buying an investment property outright would require you to have a much greater amount of capital as you will need to pay for your down payment.
Robo Advisors
Investing in stocks is the way to go, but if you are not familiar or even comfortable with this then you can easily do it through a Robo advisor if you want. This is an online investment platform, and it handles all of the investments for you. It includes creating your portfolio and then it manages it all for you. You can also reinvest dividends on a regular basis and you can also do this through a taxable account.
Buy a Property
This one is a bit of a mixed bag. On the plus side, owning your own property gives you the chance to build a substantial amount of equity over a number of years. This is done by you paying down your mortgage as the value of the property market increases. Owning a home comes with a certain amount of leverage as well. You can buy a home with around a 3% down payment. You can easily get the benefit here and you would be surprised at how much of an investment you can make. Even if you do nothing other than pay off your mortgage, you will soon find that your investment can grow substantially. The price appreciation of the property can make your numbers go even higher too. The downside to buying a property when you are young is that permanent ownership of a home may not work to your advantage. If you are early in your career, then you might need to move in the future. If you do then you may find that owning your home works against you. Check out this mortgage amortization calculator if you want to know more.
Open a Retirement Plan
There are two main reasons why you would want to do this. You may find that you can get an early jump on retirement savings or that you can even get a tax deferral if you want. If you start contributing a certain amount a year to your plan, then you may find that you can retire early and that you can also speed up the amount of time it takes you to achieve your goals. The longer you wait to start putting away for your retirement, the less interest you will generate and you may find that your life is not as comfortable. Either way, you need to try and save as much as possible, as early as you can. You don’t need to have a compelling reason to save up as early as possible, and you don’t need to contribute a lot either. In fact, it’s very easy for you to move forward by putting away a small amount, that doesn’t affect your lifestyle.
Tax Deferral
The tax deferral angle is fantastic. If you make the same investment every year into an investment account that is taxable then you will have a federal and state income margin of around 25%. This will lower your return on your investment to 5.25%. If you fast-forward 40 years then you will soon see that you pay 35% less, because of taxes. If your company offers a retirement plan, then this can also be a good idea. If they have a 401K to offer, then you can easily contribute your own money and then they will match it. Retirement plan contributions tend to be tax-deductible from the income you have right now, and a contribution of this size would be enough to give you a huge break on your tax.
Of course, it’s very easy for you to take advantage of the opportunities that are out there and if you follow this guide, then you will soon find that it is easier than ever for you to not only get the best result out of your tax breaks but for you to also put away a huge amount of savings. If you aren’t quite sure how to make the most out of your savings or if you want to take things to that next level, then remember that hiring a financial advisor is always the way forward. When you do this, you will soon find that they can help you with just about anything you need, and they can also talk through the opportunities that are out there for your tax as well so keep that in mind if you want to take things to that next level.