by T.Yeap

Created on: September 22, 2009   Last Updated: September 24, 2009

To most youngsters in their 20's, investing is still a foreign land yet to explore. However, it's crucial to start investing young because time is on your side, and if the investment return only yields a modest 6% per year, the compounding interest at the end of their retirement age will make a big difference compared to the individual that starts investing in their 30's. Are you wondering how to invest smartly in your 20's? Here are several tips that I obtained while I was in my early 20's from my mentor and family.

1) COMPANY RETIREMENT PLAN

Take advantage of your company's 401 (K) or other retirement plan that they offer, most company match 50% of your contribution up to the first 6% of your pay. It is also convenient that most of them offer direct deduction from your pay check and the deduction usually is before tax and therefore reduce your yearly income and less tax will be taken out each pay period. With the automatic contribution to your retirement plan each pay period, you will be able to invest in the market consistently. Also, make sure you review all the prospectus and pick 3 or 4 out of the bunch to enroll. If you are nervous about the investment, you can invest in things that you are familiar with as the prospectus of each funds will list out the major holding and their investment strategies.

2) INVEST IN IRA (INDIVIDUAL RETIREMENT ACCOUNT)

Besides the company investment, you should also open an IRA account with your own choice of brokerage firm. There's plenty to choose from and if you are more knowledgeable and you can manage your own investment, choose the online trading through Scottrade or E-trade. If you decide not to do it yourself, they also offer service to help manage the account for you. However, most IRA account required a minimum starting a mount of about $3,000 and then you can choose your own investment option either bimonthly, monthly, biannually or annually.

The smartest choice will be investing a small amount bimonthly or monthly until the maximum contribution of $5,000 at the end of the year. It's similar concept with the company retirement plan, as you will need to choose different type of mutual funds or stocks you would like to purchase. IRA offered more variety, therefore your investment portfolio will be more diversified. It is also advised by investment guru that during your 20's, your portfolio should reflect about 90% stocks and 10% bond as you are able to take the risk

3) CERTIFICATE DEPOSIT (CD)

It's is also wise to

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