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One of the smartest choices you can make for your future is to start investing in your early 20s. With a long-term plan, you have the chance to get a big return on your investment. However, it can be challenging to know where to begin with the wide range of investment possibilities. In this piece, we’ll explain how to spend, how to set financial goals, and how to use different tools to build an investment portfolio that fits your needs.

Defining Your Financial Goals

It’s essential to decide your financial goals before you start investing. What do you hope to accomplish with your investments? Do you intend to put money aside for a down payment on a home? repay student loans? Retirement? You can start creating an investment plan that fits your financial goals once you have a firm understanding of them.

Investors have access to a wide variety of financial tools, each of which has certain advantages and hazards. Among the most well-liked investments are:

1. Stocks: 

By acquiring stock, you get a minor stake in an organization. While stocks have the potential to offer big rewards, they also carry a significant amount of risk.

2. Bonds: 

Governments or firms get loans in the form of bonds. Compared to stocks, bonds can offer a more consistent return, but they also have smaller potential gains.

3. Mutual Funds:

A mutual fund is a collection of securities like stocks, bonds, or other financial instruments. You can invest in various stocks or bonds at once, and a qualified investment manager is in charge of managing them. Mutual funds can offer diversity and skilled management, but they also have fees.

4. Exchange-Traded Funds (ETFs):

ETFs hold a variety of equities or bonds, just like mutual funds do. But they are traded on a market like stocks, which means they can be bought and sold throughout the day. In general, ETFs are more affordable than mutual funds.

5. Real estate:

If you want to keep the property for a long time, real estate can be a rewarding investment. But it takes a big investment up front and can be hard to run.

What exactly is the 50/30/20 rule?

The 50/30/20 rule is a great guide for figuring out how much of your money to put towards each aspect of your financial life. According to the guideline, you should allocate 50% of your income towards essential costs (such as rent, food, and utilities), 30% towards expenditures (like entertainment and hobbies), and 20% towards savings and reducing your debt.

There are also the following investment choices: 

1. Public Provident Fund (PPF): 

PPF is a government-sponsored savings program that provides returns that are tax-free. With a 15-year lock-in period, the investment qualifies as a long-term option.

2. The Pension Fund Regulatory and Development Authority (PFRDA): 

The PFRDA which is in charge of the National Pension System (NPS), is a retirement-oriented investment option. It provides tax benefits as well as a low-cost investment choice.

3. Gold: 

Due to its reputation as a safe-haven asset, gold is a well-liked investment choice in India. Physical gold, gold ETFs, and digital gold are ways to invest in gold.

4. Fixed Deposit: 

A fixed deposit is an investment that provides a return that is guaranteed. Although the returns are often smaller than those of other investing strategies, the risk is similarly lower.

5. Robo advisors: 

These are digital platforms that employ algorithms to build and manage investment portfolios in accordance with your objectives and risk tolerance. A robo advisor has minimal costs, diversity, and accessibility as advantages.


Investing in your early 20’s can lay the foundation for a secure financial future. Before diving into the world of investments, it’s crucial to define your financial goals. Whether it’s saving for a down payment, paying off student loans, or planning for retirement, having a clear understanding of your objectives will help you shape your investment strategy accordingly. Each investment avenue comes with its own set of risks and rewards, so it’s important to conduct thorough research and consider factors like diversification, fees, and long-term growth potential. Additionally, it’s beneficial to follow the 50/30/20 rule to manage your finances effectively. 

Remember, investing is a long-term commitment especially when you’re investing in your 20’s which means patience and discipline are key. Regularly review and rebalance your portfolio as per your changing financial circumstances and market conditions. By starting early, setting clear goals, diversifying your investments, and staying informed, you can position yourself for financial success and achieve your long-term aspirations.