The final tip, and this one is taken from the legendary value investor Benjamin Graham, The graph below shows what happens over 30 years if you save $250/month in today’s dollars and earn a 7% rate of return. As you can see below, very little growth occurs when you’re just starting out. The power of compounding is easy to explain, but it’s much more difficult to execute in real life because humans are wired to seek instant gratification. The next rule is a powerful one, and once again, it applies to all investors, but especially those in their 20’s. My son did bet the farm on crypto, and he was not diversified, so he’s now learning the first rule referenced above – know your risk profile. Fortunately, I didn’t invest in dot-com stocks in my early years, but I was highly concentrated with one real estate partnership, which served as my near bankruptcy experience. I’m sure many 20-year-olds are sick right now because they bet the farm on crypto. I just can’t stress the importance of this rule. However, a word of caution here, as principal preservation should always be top of mind.Īs I told often remind my kids, money simply does not grow on trees, and that’s where earnings (having a job to support yourself) is critical to understanding the concept of investing.Īnother important lesson for all investors, including 20-year-olds, is to always diversify. It’s actually normal to take elevated risks in your 20s, because your time horizon is much longer, which means volatility has more time to recover. When I was in my 20’s, I took substantial risks, and perhaps I’ll write an entire article on the lessons I learned in my younger days. The first basic fact applies to all investors, and that is to always understand your own risk tolerance profile. So, as a father of five, I suppose I have a good grasp on twenty-year-olds, and given my vast experience (at parenting) I thought it would be useful to provide a few basic facts with regard to investing. While I’m not sure how many 20-year-olds follow me, I do know that I have gained a number of followers as I guest lecture at universities such as New York University, Cornell, Georgetown, Penn State, and John Hopkins. With over 100,000 followers on Seeking Alpha, I know that many reading this article fit into the Gen Z classification. Last week on Twitter I got a message in chat from a 20-year-old who asked me to list the top 10 REITs for a 20-year-old. This means that Gen Zs are now between 12 and 24, and in the same age range as four out of five of my kids. To be clear, according to Harvard University, I’m part of the Gen X group, who was born between 19, and researchers use the late 1990s as starting birth years and the early 2010s as ending birth years for Gen Z. I figured it was time for me to explore this platform, to gain more followers, in an effort to connect with the Gen Z crowd.
I’ve been fairly active these days on Twitter, Inc.
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