The Most Important Investments for Clients in Their 20s

This is the latest in a new series of columns about portfolio strategies, financial planning and asset management.

Ritholtz Wealth Management CEO Josh Brown says people in their 20s should focus on their career paths, and on enjoying their youth, rather than spending time worrying about asset allocation.

Investing in healthy career advancement will matter more to their future wealth than deciding on specific portfolio allocations in early adulthood, he suggested, noting in a recent blog post that at age 47, his own 401(k) exclusively comprises a global stock portfolio.

“I take maximum risk for maximum reward and I spend the extra time I have from not tinkering by taking the sort of actions that will enable me to earn more,” he wrote.

Twenty-somethings should focus on degrees, professional certifications and good employers, Brown advises, and remember to enjoy life experiences like dating and parties while they can.

“They need not spend hours poring over a mutual fund prospectus, counting basis points or reshuffling their financial assets,” he wrote. “The stock market stuff won’t matter financially. The career path will.”

I asked financial advisors recently whether they share this view — and what their biggest piece of advice was for people in their 20s. Many advisors, responding in emails, seemed to share Brown’s view on emphasizing career path, to varying degrees, and offered their own tips for young adults, including the wide view that saving and investing early are vital as well.

“Focusing on their careers and investing are both extremely important for 20-somethings. So much of your career pathway is secured in your 20s. Your negotiation for both your first salary and benefits is the first step on the ladder that you’ll climb. And so is investing,” advisor Sally Boyle of SJ Boyle Wealth Planning in New Hampshire told me.

“Those first invested dollars serve as the basis for future compound interest additions. And compound interest is your friend,” she said. “Investing in your 20′s is not complicated. There is no need to invest in anything other than equities, because you have years to the time when you need the funds so you can outwait any volatility. So determine a comfortable allocation to equity ETFs, regularly deposit, set it and forget it!”

Jen Swindler, owner and advisor at Money Illustrated, also noted the power of long-term investing.

“While people in their 20s likely don’t need to get highly granular and obsessive about allocation strategies, investing systematically and consistently into a diversified portfolio from a young age is one of the best moves they can make for their long-term success,” Swindler wrote.

“Investing from a younger age also helps reduce fear of investing later in life; in my experience with clients, the longer someone can see the impact of investing on their own wealth, the more they tend to be able to ride out market volatility when it occurs,” she added.

Avoid the Traps

Brown’s comment implies it doesn’t matter what decisions young people make with investing at this state of their lives, “ignoring the very real impact of social media on people in their 20s, including FOMO, crypto hype and meme stocks,” making them more likely to put disproportionate amounts of money into trending investments rather than a diversified portfolio, said Swindler.

She suggests young people start investing as early as they can, ideally in a 401(k) at least up to any employer match, if possible, increasing contributions as income rises.

Indeed, most young investors haven’t developed the investing knowledge or behavioral discipline to navigate the markets without falling into common traps, wrote Vermillion Private Wealth owner James Vermillion. FOMO, overconfidence and short-term thinking can turn what should be a long-term strategy into something resembling gambling, he said.

“My biggest advice for people in their 20s is to adopt a continuous learning mindset — not just in your career and finances, but in all aspects of life,” he wrote. ”Focus on building skills that will compound over time, like writing, critical thinking and communication — evergreen abilities that remain valuable regardless of changes in the job market.”

Eustache Clerveaux, financial planner and senior analyst at Hudson Financial Group, agrees with focusing on investments beyond the financial markets.