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In Your 20s? Time Is On Your Side—Keep It There

Your 20s are typically a decade of unparalleled growth and change. It’s during this 10-year period that many people graduate from college, start careers, travel the world, buy their first car or home, or get married. It’s also a time when a lot of people find themselves strapped for cash.

That’s particularly true for today’s twentysomethings, many of which are graduating from college with high levels of student loan debt—state averages ranged from a low of $20,00 to a high of $36,350 in 2016.1 This generation has also found themselves earning less money than their parents did when they started out 30 years ago.2 As a result, many twentysomethings are finding it difficult to make ends meet—let alone set aside a little money for the future.

In fact, people in their 20s who have a 401(k) or brokerage account are part of a small minority of Millennials who participate in the stock market. According to Bankrate’s 2016 MoneyPulse survey, only one-third of millennials investing in the market.3

But there’s one area where young investors have a clear advantage over older investors: time. Numerous studies demonstrate that people who start saving and investing in their 20s are more likely to achieve financial security than those who wait until their 30s or later.

We’ve distilled the oft-complex world of investing down to three essential considerations for young investors:

1. Start right now: The biggest benefit of investing in your 20s is the sheer length of time you have until retirement. You might think you don’t have enough money to invest, but even a little bit can go a long way when you start early. That’s because your portfolio will have time to benefit from the potential effects of compounding—the process of generating additional earnings by reinvesting an investment’s gains over a long period of time. In fact, the sooner you start saving, the less you’ll need to save each month in order to reach your goal. Conversely, the longer you wait, the more you’ll need to sock away.

2. Be aggressive: If you have a higher risk tolerance, you should be able to take bigger risks than you would if you were closer to retirement. Yes, you could end up having bigger losses when the market falls, but you also have more time to make up for those losses. History shows that over longer periods of time, aggressive, stock-centric investment portfolios far outpace more conservative or moderate portfolio allocations over time.

3. Avoid fees: Make sure you know what the investment services you use cost and how that will affect your returns over time. It’s easy to overlook the toll of investment fees, particularly when they seem so insignificant—what’s 1% in the grand scheme of things? But compounding works for fees, too, which could eat away at your bottom line over time. Your best bet is to keep fees as low as possible.

1The Institute for College Access and Success, “Student Debt and the Class of 2016,” September 2017.

2U.S. Census Bureau, “Young Adults, Then and Now,” 2013.

3Jill Cornfield, “Millennials slow to start investing in stock market,”, 7/6/2016.

What You Can Do Next

Remember, time is on your side. Investing in your 20s can increase the likelihood of reaching your financial goals,  

Important Disclosures

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Schwab Intelligent Portfolios charges no advisory fees. Schwab affiliates do earn revenue from the underlying assets in Schwab Intelligent Portfolios accounts. This revenue comes from managing Schwab ETFs and providing services relating to certain third-party ETFs that can be selected for the portfolio, and from the cash feature on the accounts. Revenue may also be received from the market centers where ETF trade orders are routed for execution.

Please see the Schwab Intelligent Portfolios disclosure brochures for information related to the cash feature in Schwab Intelligent Portfolios.

Schwab Intelligent Portfolios® is made available through Charles Schwab & Co. Inc. (“Schwab”), a dually registered investment advisor and broker dealer.


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