5 Things I Wish I Knew About Investing When I Was 25
If you could go back to age 25 and give yourself five pieces of investment advice, what would you say?
Often, we find with our clients that financial priorities become clearer with hindsight. One of the most common themes with clients approaching retirement is that small decisions early can have a meaningful impact later in life. Some of the most important investing lessons aren’t about picking the “right” stock but developing good habits from the outset.
At age 25, retirement can feel impossibly far away. At this age, there are more immediate priorities competing for your attention like paying off student loans, saving for a first home, or starting a career. Familiarize yourself with five lessons when it comes to investing young:
Start earlier than you think
Don’t let market volatility scare you away
Understand what you are investing in
Increase your savings as your income grows
Let your strategy evolve as your life changes
The goal isn’t to have everything figured out at 25; it’s to give yourself a head start.
1. Start Earlier Than You Think
As a young investor, time may be one of the most valuable advantages. When you invest, your money has potential to grow. Over time, the returns on your investments can themselves generate returns. This is the power of compound growth: the longer money has to compound, the greater the effect.
That is why starting early can be so valuable.
You don’t need large sums of money to invest to be successful. It’s all about consistency. A young person who consistently invests a manageable amount of money over the long term may be better positioned than someone who may wait until they can afford to invest a larger amount.
For young investors, it’s easy to get caught up in seeking the perfect investment. But there is no single investment that will magically determine your financial future. Building consistent habits and staying committed to your long-term goals can be much more significant in the grand scheme of things.
2. Don’t Let the Market Scare You Out of Investing
One of the most important lessons is volatility is part of investing. Markets go up and they go down. Both are inevitable.
Market headlines can make short-term movements feel like they require an immediate response. When markets are falling, it’s natural to feel like you should sell. When markets are rising, you may be tempted to invest more aggressively. Keep your financial situation and broader plan in mind. Your investment strategy should be based on your goals, time horizon, and risk tolerance — not simply what is happening in the market that day.
For a younger investor, a market decline may look very different when viewing it through the lens of a 30- or 40-year investment horizon. If you won’t need to access your invested money for decades, short-term fluctuations aren’t likely to disrupt your overall plan.
This perspective doesn’t make market downturns easy. They aren’t. But having a plan in place makes it easier to stay focused when the market becomes volatile and emotions are running high.
Don’t let temporary market lulls derail your long-term financial vision.
3. Understanding What You’re Actually Investing In
Investing has never been more accessible. With a few taps on your phone, you can buy stocks, exchange-traded funds, mutual funds, and other investments. But accessibility doesn’t necessarily mean comprehending.
Before investing in something, it is important to understand what you are actually buying and how it fits into your broader financial picture. That’s where we come in as your financial advisor to help you make sense of:
What are you investing in?
What risks are you taking?
What are the costs or fees involved?
How is your portfolio diversified?
When will you need your money?
How does the investment fit into your overall goals?
It’s important to avoid the temptation of investing simply because of a trend or someone else’s recommendation. Different investments serve different purposes, and an investment that makes sense for someone else may not make sense for you.
Confidence in investing doesn’t come from knowing everything. It comes from knowing enough to make informed decisions and knowing when to ask for help.
4. Increase Your Savings as Your Income Grows
In your early to mid 20s, there are a lot of financial needs that compete for your attention.
You are in a stage where you are working to establish a career, you may be paying rent, student loans, car payments, or other expenses while trying to build an emergency fund and set up a good financial foundation. During this stage of life, there may not be much room in your budget for investing.
As your career progresses, your income may begin to increase through promotions, raises, or career changes. One of the best opportunities to build wealth is to increase your savings as you see increases in income.
You don’t have to save a huge amount of money immediately. The goal is to create a habit that grows with you.
5. Your Investment Strategy Should Change as Your Life Changes
The investment strategy that makes sense for you at 25 probably won’t look the same at 45 or 65. Your needs change as life goes on, and your financial plan should adjust with you.
Big life events such as marriage, a home purchase, starting a family, career changes, or receiving an inheritance can all affect your financial priorities. Investing shouldn’t be a “set it and forget it” decision. Your goals, time horizon, need for liquidity, and comfort with investment risk can be continually re-evaluated.
As your financial advisor, we can help answer the question of “does my financial plan still reflect the life I am living, and the goals I am working toward?” We are here every step of the way to make those changes when needed, so you can focus on what matters most to you.
Start Building Good Habits Young
Looking back from the perspective of someone approaching retirement, it is easy to wish you started earlier, saved more, or understood certain financial concepts sooner. But in reality, you don’t need to have everything figured out by 25.
You simply need to start building good habits.
Whether you are just starting out — or if you are wondering if your current investment strategy still fits your goals — working with your financial advisor can help you understand your financial picture and develop a long-term plan.
Your future self may be glad you started today.