The Basics of Investing: How Small Steps Today Build Lasting Wealth
WHY START INVESTING NOW?
In your 20s, money can feel tight—between rent, student loans, and everyday expenses, investing might seem like something for “later.” But here’s the truth: your greatest advantage right now isn’t a huge paycheck—it’s time. Every dollar you invest today has decades to grow, multiply, and work harder than you ever could.
Investing isn’t just about retirement—it’s about creating options. Want to travel, buy a home, or retire early? Starting now sets the stage for those choices.
💡 Pro Tip: Don’t wait until you “make more money” to invest. The sooner you start, the less you’ll need later.
Start Small, Start Smart
You don’t need to be wealthy to invest. Today, apps like Robinhood, Fidelity, and Acorns let you start with as little as $5. What matters most isn’t the amount—it’s building the habit.
Think of it this way: skipping one takeout order or coffee each week could be your ticket into investing. Those small, steady contributions snowball into something big.
⚡Quick Win: Set up an auto-transfer of $25 a month into an investing account. You won’t even notice it’s gone—but future you will.
The $20 Rule
Yes, money grows money—but it doesn’t take much to begin. Even $20 a month is enough to get started, especially in your 20s. That’s less than one night out.
The key isn’t throwing in massive amounts—it’s consistency. Keep adding bit by bit, and let compounding do the heavy lifting.
Your First Moves
Pick a Platform: Choose an investing app or brokerage you trust.
Automate It: Set up automatic contributions—even $25 a month is a great start.
Start with Funds: Index funds or ETFs give you exposure to hundreds of companies at once, making it simple to begin.
📌 Remember: Your first investment doesn’t have to be perfect—it just has to happen.
THREE FREINDS, THREE CHOICES
Let’s imagine three friends—Alex, Bailey, and Chris—who each invest $5,000 a year. Same amount of money, but very different results:
Alex: The Early Starter
Starts at 25 and keeps investing until 65. Ends up with the biggest balance by far.
Bailey: The Wait-and-See
Invests from 25–35, then stops. Even with just 10 years of contributions, Bailey still ends up with more than Chris.
Chris: The Catch-Up
Waits until 35 to start and invests all the way to 65. Despite contributing three times as long as Bailey, Chris ends up with almost $200,000 less.
👉 Takeaway: Starting early is the ultimate cheat code. Even small contributions now beat big ones later.
YOUR MONEY, YOUR CHOICES
Stocks (Owning a Slice of a Company)
Think Apple, Nike, or Netflix. When you buy stock, you own a tiny piece of that company.
How You Earn: Stock prices go up, and some companies pay dividends.
Risk: Big growth potential, but prices can also drop quickly.
💡 Pro Tip: Only invest money in stocks that you don’t need for the next 5–10 years. The market goes up and down—be patient.
Bonds (Like Lending Money for Interest)
Buying a bond is like loaning money to a company or the government.
How You Earn: Regular interest + your money back at maturity.
Risk: Safer than stocks, but slower growth.
MUTUAL FUNDS AND ETFs
Instant Variety Pack
Instead of betting on one stock, you buy a basket of many. Think of it like a Spotify playlist instead of just one song on repeat.
How You Earn: Growth from the basket of investments + dividends or interest.
Risk: Depends on the mix—some are growth-focused, others are steady.
DIVERSIFICATION
Don’t Bet It All on One Thing
Putting all your money into one stock is like only watching one show. If it gets canceled, you’re stuck. Diversification is like having Netflix, Hulu, and Disney+—no matter what happens, you’re covered.
Mutual funds and ETFs do this for you automatically, spreading your money across hundreds of companies.
⚡Quick Win: For beginners, ETFs and index funds are the easiest way to create a diversified portfolio.
ASSET ALLOCATION
Your Money Mix
This is just how you split your money between growth (stocks) and stability (bonds).
In your 20s, you’ve got decades ahead, so lean stock-heavy for growth, but add some bonds for balance. Think of it like meal prep: too much fast food (all stocks) is risky, too much salad (all bonds) is boring—mix them for long-term health.
💡 Pro Tip: Your mix doesn’t have to be perfect right away. You can adjust as your goals change.
The following chart highlights the trade-off between risk and reward when choosing a portfolio allocation.
Conservative portfolio (70% bonds, 30% stocks) offers more stability and smaller losses in bad years, but delivers lower long-term growth.
Moderate portfolio (50/50 split) balances growth potential with reduced volatility.
Aggressive portfolio (70% stocks, 30% bonds) provides the highest historical returns but also exposes investors to larger short-term losses.
In short, the more stocks in your mix, the greater your potential gains—but also the greater the swings along the way.
ASSET ALLOCATION COMPARISON CHART
Benchmark allocation information is located on the notes page at the end of this document.
Source: Towneley Capital Management Inc.; Standard & Poor's Corp; Global Financial Data, Inc.
There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives
GROWING YOUR MONEY WITH PURPOSE
Socially Responsible Investing (SRI)
Want your money to reflect your values? Socially Responsible Investing (SRI) focuses on companies that care about the planet, people, and ethical practices—like renewable energy, fair treatment of workers, and diversity.
It’s like putting your dollars where your values are. The tradeoff? SRI funds sometimes cost a little more and may not always beat traditional funds. That’s why many investors mix them in rather than going all-in.
✅ Bottom line: You can grow wealth and support causes you care about.
CONCLUSION → YOUR FUTURE SELF WILL THANK YOU
Investing in your 20s isn’t about perfection—it’s about getting started. The earlier you begin, the more your money works for you, and the less you’ll have to stress later.
Set aside a little, stay consistent, and let compounding do its thing. Future you—the one who wants freedom, choices, and maybe early retirement—will be glad you didn’t wait.
Ready to invest in your future? Schedule a call with a Towneley wealth advisor today.
Call our office at 800-545-4442 or submit a request using the button below.
