How to Invest in your 20s (Best Beginners Guide)

How to invest in your 20s (best beginner's guide)

Written by Agatha

September 17, 2020

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You’ve probably already heard of the greatest secret to investing. It’s the greatest and most valuable asset in your investment portfolio. The best part is, you already have it in abundance. You know what I’m talking about, right? Okay fine, I’ll reveal the secret: TIME.

If you’re a visual learner, you can watch a visual version of this on our YouTube Channel:


Investing in your 20s 


Since I’m also in my 20s, I thought I already had a deep understanding of the importance of this asset until Morgan Housel, the author of my current read,  The Psychology of Money (timeless lessons on wealth, greed and happiness) made me appreciate it even further. 

He writes;

“More than 2,000 books are dedicated to how Warren Buffet built his fortune. Many of them are wonderful. But few pay enough attention to to the simplest fact: Buffet’s fortune isn’t due to just being a good investor, but being a good investor since he was literally a child.

As I write this Warren Buffett’s net worth is $84.5 billion. 

Of that, $84.2 billion was accumulated after his 50th birthday. 

$81.5 billion came after he qualified for Social Security, in his mid-60s.

Warren Buffett is a phenomenal investor. But you miss a key point if you attach all of his success to his investing acumen. The real key to his success is that he’s been a phenomenal investor for three-quarters of a century. 

Had he started investing in his 30s and retired in his 60s, few people would have ever heard of him.


Consider a little thought experiment:


Buffett began serious investing when he was 10 years old. 

By the time he was 30, he had a net worth of $1million, or $9.3 million adjusted for inflation. 

What if he was a more normal person, spending his teens and 20s exploring the world and finding his passion, and by age 30 his net worth was, say, $25,000?

And let’s say he still went on to earn the extraordinary annual investment returns he’s been able to generate (22% annually) but quit investing and retired at age 60 to play golf and spend time with his grandkids. What would a rough estimate of his net worth be today?

Not $84.5 billion. $11.9 million. 99.9% less than his actual net worth.

Effectively all of Warren Buffett’s financial success can be tied to the financial base he built in his pubescent years and the longevity he maintained in his geriatric years.

His skill is investing, but his secret is time.

That’s how compounding works.

His skill is investing, but his secret is time.



That’s how compounding works.

Think of this another way. Buffett is the richest investor of all time. But he’s not actually the greatest—at least not when measured by average annual returns.

Jim Simons, head of the hedge fund Renaissance Technologies, has compounded money at 66% annually since 1988. No one comes close to this record.

As we just saw, Buffett has compounded at roughly 22% annually, a third as much.

Simons’ net worth, as I write, is $21 billion. He is—and I know how ridiculous this sounds given the numbers we’re dealing with—75% less rich than Buffett.

Why the difference, if Simons is such a better investor?

Because Simons did not find his investment stride until he was 50 years old. He’s had less than half as many years to compound as Buffett. 

If James Simons had earned his 66% annual returns for the 70-year span Buffett has built his wealth he would be worth—please hold your breath—sixty-three quintillion nine hundred quadrillion seven hundred eighty-one trillion seven hundred eighty billion seven hundred forty-eight million one hundred sixty thousand dollars.” 

His skill is investing, but his secret is time. That’s how compounding works.


How to start investing in your 20s


The journey to being a seasoned investor in your 20s can be divided into 4 building blocks:

  • Earning
  • Spending
  • Saving 
  • Investing

A. Earning


You need money to start investing. You can earn a living through your 9 to 5, business, side hustle e.t.c

Have you thought about learning a new skill and using it to expand your revenue streams?

If you have access to the internet, then you can literally learn anything. You have access to as much information as you’d get from a library or university in your hands. The internet also gives you the distribution power of a TV or radio station. 

All you need is a desire to learn, which will increase your ability to earn.

One of the reasons people postpone investing in their 20s, is the feeling that they don’t make enough money to save and invest. 

Living below your means affords you extra money for saving and investing. However, there’s only so much you can cut back on. This means that while you’re young, energetic and have time, you should upgrade your skills.

Use your free time to gain high-income skills such as copywriting, blogging, digital marketing, software engineering, search engine optimization, web design and many more. 

I learnt all those skills by investing in the Launch Your Blog Biz online course by professional bloggers Lauren & Alex from Create & Go who make over $10,000 per month from their two blogs.

Launch your blog biz

If you have always wanted to learn how to create and grow a successful blog without being a tech guru or a pro writer that makes over $1,000 per month, sign up for their course.

I wouldn’t advice that you should leave your 9 to 5 job to pursue your side hustle. I still have my 9 to 5. What I’m sure of, however, is that it’s hard to build wealth while you rent out your time as we do in our 9 to 5 jobs. You need to own a piece of a business, like a blog, podcast, YouTube channel, stocks in a publicly listed company, a consultancy, real estate e.t.c 

Make use of courses, both free and paid (invest in yourself!) to upgrade your skills.

Remember that in the current world, a job is not something that you go to, a job is something that you do. 

Embrace the digital world, you can make money anywhere

A dollar made in your 9 to 5 is worth the same as a dollar you’ll make selling something online that you created.

As you spend your 20s building your career, also spend time:


1. Building a financial network


As you spend your 20s having fun and building your career, also spend time building strong relationships based on trust. Trust is also a currency, and people use it all the time to determine if they’ll do deals with or through you. 

A friend taught me something valuable: you don’t have to know everything about investments or learn everything about every investment vehicle. All you have to do is know an expert in every financial vehicle. He called this the ‘pathway to knowledge.’ 

If you wanted to invest in cryptocurrencies tomorrow, who would you call to ask all the questions about it? 

If you want to buy a house, do you have someone on your contact list that you trust to give you the best advice? 

Do your family members or friends trust each other enough to put money together for a project?

Can people lend you money without you having to explain why you need it? 

Do you know someone who’s always in the know about the next big thing? 

It takes time and effort to build these networks. You also have to offer some form of value in order for such people to be willing to cut you some great deals and give you the best advice.


B. Spending


Earning an income is easy. Keeping the money is a different ball game. 

Before you get your paycheck, you should always have a spending plan, commonly referred to as a budget. If you don’t have a spending plan, you won’t have any money left to save.

A lot of adults end up living paycheck to paycheck: spending ALL their monthly income to cover their expenses, including debts, therefore leaving no money for savings. It’s a reality for a lot of people who do not have a financial plan or financial awareness

Having a spending plan will allow you to:


2. Pay off high-interest debt


Before you start thinking of where to invest, you need to either pay off your debt and or manage it.

It doesn’t make sense to have an investment that gives you a 7% return per annum while you have credit card debt that charges you 22%. Some mobile money loans sometimes charge above 84%. 

You can’t beat these interest rates, it’s pointless. 

So if you have high-interest loans, handle that first. 

If you have low-interest loans such as a student loan which is 4%, then come up with a plan where you pay it consistently as you also onboard investments, which we’ll get to.


Debt payoff planner and debt payment calculator


Click here to grab an easy to use debt payoff planner and debt payment calculator.

debt payoff planner

3. Build your credit score


A lot of people spend their 20s making catastrophic financial decisions

One of them is ruining their credit score, which is a number that financial institutions use to determine if you qualify for a loan.

One way to ruin your credit score is taking on too much debt and not paying back on time. 

You need to start being responsible for all aspects of your financial life as soon as possible, in your 20s. Don’t wait until you’re 30 or older to start taking charge. It’s easier if you start now.

Having a bad credit score means that banks and other financial institutions won’t lend you money if you wanted to start a business, buy an asset, pay for an emergency such a medical bill, pay for a mortgage down payment or any other financial need. 

Having a good credit score means you can access funds, at lower interest rates, that you can use to buy an asset or use it for any other investment option.

Want to learn more about credit scores, why your credit score matters and factors that determine your creditworthiness? Here is a great article.


C. Saving


Having a good spending plan that ensures you live below your means results to having extra money to save. Saving involves putting money aside, mostly done in a bank account.

We save money for different reasons/goals: to buy a car, for emergencies, a college fund etc

Before you consider moving to the next building block which involves growing your money by acquiring assets that might increase in value (investing), you should:


4. Build an emergency fund


I recently learnt something interesting about building an emergency fund. Your emergency fund should equal X months of your living expenses, where X represents the current unemployment rate in your country. 

Google the unemployment rate in your country. 

The unemployment rate in the United Arab Emirates, where I live, is 2.35%.This means I should have enough money in my emergency fund account to cover roughly 2 and a half months of my total monthly expenses.

In Kenya, the unemployment rate is about 10%. Using this rule of thumb, you should have an emergency fund equal to 10 months of your living expenses.

The latest unemployment rate in the USA is 7.9%, so an American should have an emergency fund to cover about 8 months of their living expenses. 

I think that 10 or more months is too much money to just be sitting in an account, but I also think that this is a great concept to consider especially during this COVID-19 pandemic where one can be unemployed for a year or more. 

My best bet is 6 months of living expenses and I wrote a guide to help you build your emergency fund. 

D. Investing


Ideally, you should move to this block after building an emergency fund and paid off high-interest debt.

Investing differs from saving in several ways: 

saving vs investing

The first step to passively investing is realizing that you need money to do it. If you truly want to know ‘where’ to start, it starts by learning how to manage your income so that you can avail money for investing. You do this through:


5. Investing in financial education


What are the effects of inflation?

Can you define risk diversification? 

Can you comfortably calculate the interest rates of a loan? 

If you can answer the three questions, then you’re smarter than two-thirds of the 7 billion people in the world. 

Only a third of the world is financially literate, yet it’s the one skill that determines how well you’ll do financially. 

Being financially illiterate comes with major risks. You pay more in interests rates for loans. You risk having bigger debts. You pay higher transaction fees. And financial institutions bank on your ignorance, which is one of the reasons so many people are stuck in credit card debt and mobile money loans.

If you couldn’t answer any of the three questions, you should spend your 20s upgrading your financial literacy knowledge. 

This was my first investment. I studied many personal finance books when I was still stuck in debt and didn’t have a significant amount of money to save or invest. 

You need to do the same. The knowledge is what you need in order to make informed investment decisions, it’ll also come in handy when you’re being recruited into Ponzi schemes.

Here is my best book recommendation list: 


    • Nudge – Richard Thaler & Cass Sunstein 

Over and above answering the questions correctly, you should know how to read financial documents such as your bank statements, the difference between debits & credits, read and understand financial implications of a contract…

This blog is also a great resource for you to upgrade your financial literacy knowledge. Subscribe for weekly gems.


6. Health insurance


For a lot of us, we’re one serious illness away from poverty or filing for bankruptcy. The government is supposed to offer good healthcare systems, and we should call out the government on failing us on this one.

In the meantime, since we have to do what we have to do, getting yourself good health insurance should be a financial priority.

Before you start thinking about investing, get yourself health insurance. You don’t want to be in a position where you have to liquidate your investments every time you’re sick. This means losing out on compounding which is one key reason we invest anyway.

And don’t just go with the cheapest option, ask for quotes from various providers, take your time to pick one that suits your lifestyle while paying attention to any pre-existing conditions.


Where to invest in your 20s


1. Employer Retirement Fund


Does your employer offer a pension plan? A lot of people that I’ve asked this question say they don’t know. This can be either because they didn’t read their employment contract or because their employer doesn’t play an active role in ensuring that they sign up.

By not signing up if they do have one, means you’re leaving free money on the table. 

It could be a government pension scheme such as the NSSF in Kenya or one offered by your employer. 

Be proactive about your retirement as soon as now. Yes, you might think that you’re too young and that being 65 is a million years away but it’s not. As Richard Thaller and Cass Sunstein write in Nudge, “self-control issues are most likely to arise when choices and their consequences are separated in time.” Find a balance between spending your money now and investing in your future.

Ask your employer if they offer a pension plan and sign up.


2. “When you’re young, you’re either very rich or very many.”


This is one of my favourite investing quotes that a member of an investment company that I belong to keeps repeating.

If you were born rich (please rescue me!), kudos to you. 

If you were not born rich like most of us, then you need to find a group of young people you trust to invest together. 

When you’re many, you can all chip in small amounts and buy an asset. Numbers also means you have the bargaining power, and if it’s a serious company you also get to learn valuable investment skills from each other.  

Such groups also teach you collaboration which is a skill needed in the investment world. And the best part? What you achieve shows you that it’s possible to build from nothing. 

You achieve so much together and form strong networks.

There’s an Ethiopian proverb that I love ‘when spiders unite, they can tie up a lion.’ Nothing beats the power of collaborative effort.

If you belong to an investment group or would like to form one, you need to read two books:



These two are the blueprints to your success because they’re major risks involved in this kind of investment arrangement.


3. The Stock Market


You need to own a piece of business if you’re serious about building wealth. 

I wrote a guide on how to invest in the stock market.


4. Government Bonds & Treasury Bills


You can lend your government money to finance its activities and earn interest. This is a low-risk investment that you should take advantage of while you’re still young. Here are the best guides on bills & bonds:

How to Invest in Treasury Bills: The Ultimate Guide

How to invest in Treasury Bonds


5. Money Market Funds


Money market funds are a safe bet for a beginner in investing. They’re low risk and you only need about $20 or less to start.

I wrote a total beginners guide to investing in Money Market Funds.


6. Invest In Bitcoin


Is Bitcoin an investment or a gamble?

Should you invest in Bitcoin?

How much bitcoin should you buy?

My friend Mugo wrote the best beginner’s guide to bitcoin that will help you decide if you should dive into the world of crypto assets.


7. Real Estate

In your 20s, you won’t have the millions required to buy large parcels of land or a house/home. But that doesn’t mean you can’t afford to  invest in real estate.

REITs (Real Estate Investment Trusts) are regulated investment vehicles where investors like you and I pool their funds (just like we do while investing in Money Market Funds) to invest in real estate assets. In exchange for the money you invest, you are allocated units from which you earn dividends and capital gains. Click here for a the best beginner’s guide to investing in REITs.

Yes, you can invest in real estate without having to directly buy a house, plot, or put up rentals.

The list above on where to invest in your 20s is not exhaustive. They’re many more investment vehicles that I cannot cover in one article.

A lot of investment decisions depend on personal preferences such as your time horizon and risk appetite which I covered in this article on the four golden rules of investment management. You need a financial advisor to help you pick the best investment options for you after assessing your financial situation and other factors.

The costs of saving too little are greater than the costs of saving too much – Richard Thaler & Cass Sunstein

In Conclusion 


Apart from forgetting that getting old is inevitable, there’s another big mistake that young people make; assuming that their income will always go up as they age. This leads to procrastination when it comes to investing. 

If you play your career cards right, your income will increase as you age. But it’s not guaranteed. For a lot of people, income doesn’t go up with time, especially not as much as they’d like. 

So, they tell themselves that they’ll start ‘serious’ investing when they’re 30. When they have a bigger paycheck. 

Well, the older you get, the more responsibilities you have. You might get kids, get married, have to take care of your aging parents, acquire more stuff such as a car that needs maintenance…your expenses also go up with time.

You can’t afford to wait till you’re older to invest. The time is here and now. Start nurturing the habit of living below your means and growing your wealth today.

how to invest

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  1. Reginah Wanjiru

    Thank you so much for this. You got wheels turning in my brain. I’ll definitely take A LOT of your advice

    • Agatha

      Welcome! Do it and Thrive!

  2. Alexandra

    So Ideal!!! Literally answering the fence I’m in! Stock market… i so want to dive into that!! And you know what I AM!! Thank you again mamacita.

    • Agatha

      Yaaaaaay! Research, understand it then dive in!

  3. Grace

    Oh Shiruh!

    • Agatha

      Hihi, I know!

  4. Gg

    The read is so good. Thank you so much Agatha.

    • Agatha

      Welcome 😉

  5. Juma

    Great and quite an informative article. Thank you Agatha!

    • Agatha

      Welcome, Juma!


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