Young Investors: How to Manage Your Portfolio

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Young Investors

As a 20-something, it may be hard for you to imagine 40 years into the future where you’ll be, what you’ll be doing and how much money you’ll need. But imagine you must, for failure to plan will almost certainly leave you with insufficient funds to enjoy a quality retirement.

Young Investors

Start Early

Starting early is key. As soon as you get a job out of college, sign up for your company 401(k) plan and start contributing. Take part in any employer match if available. You may also want to open an IRA at your bank and automatically deposit a set amount from your paycheck every week.

The earlier you start saving, the more money you’ll have at retirement (no-brainer!) PLUS when you are young, you aren’t as likely to be burdened with a lot of financial obligations. As you get older, things will start to get in the way of saving, like kids, spouses, homes, cars, etc.). Your early 20s is a great time to sock away some money into higher risk investments to return higher yields.

Spread it Out

Diversification is important at this – and any – stage. Make sure your stocks are spread out over a wide range of market categories, preferably through an index fund. Investopedia recommends investing in conservative stocks with regular dividends, stocks with long-term growth potential, and a small percentage of stocks with better returns and higher risk potential. Going the individual stock route? Avoid putting more than four percent of your total portfolio into any one company. Then, if that stock tanks, it won’t destroy your entire financial outlook. Look into long-term U.S. treasury bonds too, which are generally safe with a high rate of return.

Be Disciplined

Always keep your focus and keep investing no matter what life throws at you. Yes, you may face roadblocks here and there, like a divorce or the loss of a job, but keep socking money away as soon as you get back onto your feet again. Keep your eyes on the prize and you will thank yourself for your diligence later.

Manage Asset Allocation

As you get older, your financial goals may change. Make sure your asset allocation is balanced with your life goals, assigning a set percentage of your portfolio to growth stocks, index fund stocks, dividend paying stocks, and high risk stocks. Sometimes, market fluctuations may change this percentage, so be sure to re-balance your portfolio by changing how much money you keep in each category.

Bottom line is, always be in the know when it comes to your investments. Sure, you may have a stock broker to help you manage your portfolio, but keep that person in checks and balances by questioning everything. Part of your strategy should be to have a securities lawyer on your side just in case your broker doesn’t have your best interests at heart.