Best Investments Strategies for Retirement: Building a Nest Egg in your 20s

Best Investments Strategies for Retirement

People in their 20s are guided by optimism and youth and little to no financial commitments. They’re frequently bombarded with materialistic media messages that influence their purchasing behavior.

However, a young age does mean a longer investment horizon. It allows young people to experiment with a moderate to an aggressive approach. They have the opportunity to learn and even suffer losses at an early age, which they can absorb. It will help them achieve consistent returns in the future.

Before embarking on an investment journey, make sure to understand one’s risk profile. This article will help you gain that critical insight and discuss the best investment strategies for retirement in your 20s.

Strategy 1: Identify retirement goals and milestones

Primarily, it’s critical to understand your own retirement goals and milestones. Decide what you want to do with the money you have. This will help you develop the investment strategy to ensure that your goals are achievable. It’s also essential to learn about your risk tolerance, considering how you will react if an investment underperforms.

Strategy 2: Understanding statutory investment vehicles

The Malaysian government manages a statutory retirement plan for private and non-pensionable public employees. It’s called KWSP (Kumpulan Wang Simpanan Pekerja) or EPF (Employees’ Provident Fund).  Aside from being a statutory construct, the Employees Provident Fund also allows for adhoc individual contributions, so if you have extra cash lying around you can add it to your EPF and it will grow your fund in the long term. EPF investments are closed investments, where you can only access the funds or accounts for very specific reasons. For example, buying a house or paying for your tertiary education. However you will only be able to withdraw the total amount upon your retirement.  

Strategy 3: Identify moderate to aggressive investment vehicles and alternatives

Now it’s time to pick your investment vehicles. You can choose several instruments, e.g., unit trusts, private retirement schemes, registered digital assets exchanges, and the stock market. Which one should you choose?

The tradeoff between risk and reward is critical to understand when investing in your 20s. One can’t exist without the other. In general, higher risk comes with the possibility of greater reward. However, you can always start with the baby step and expand the portfolio incrementally.

Strategy 4: Applying the Ringgit Cost Averaging (RCA)/dollar-cost averaging (DCA) as part of investment habits

Good habits will bring you a better life. This rule also applies to investments. Start to invest in RCA/DCA as part of your investment habits. You need to invest the same amount of assets at regular intervals. For example, you buy RM1,000 worth of stock ZYX every quarter. When the price is high, you’ll buy less; but you’ll buy more when the price is low.

Strategy 5: Periodical reviews of investment performance

Investing for retirement is a long run. It doesn’t stop after choosing the vehicles. As time passes, you’ll need to keep an eye on the performance of those investments to see how they’re collaborating in your portfolio to help you reach your objectives.

If your investments underperform, you’ll need to decide what to do next. Since investment markets are constantly changing, you should be on the lookout for opportunities to improve the performance of your portfolio.

Strategy 6: Continuous learning to understand the investment landscape

Investment has many technical aspects. Not to mention if you diversify and use multiple instruments simultaneously. To reduce the possibility of loss, you should continue to gain knowledge of the investment landscape. There’s nothing wrong with stepping up your game by leveraging technology like Robo-adviser.

Strategy 7: Have short-term savings and/or emergency fund

Better safe than sorry! Before you jump into the market, collect an emergency fund of at least three to six months’ worth of expenses. Set aside at least 10% of your extra savings each month for the emergency account if you’re starting from scratch.

Investing in the 20s gives a longer runway to recover from setbacks. Consider investing in an aggressive growth fund. As you get old, you can constantly adjust your risk tolerance, and plans can be revised based on financial goals. Continuous learning is critical when raising our financial IQ. It takes a long time to get the hang of it. Even later in your 30s and 40s, you may still be perplexed about certain aspects. Nevertheless, retirement comes to us all, so we should adequately prepare for it, whatever way we can. 


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