How To Make Investments In Your 20s?

Your 20s are prime years of life for various reasons—you have the zeal to earn, fresh income to spend on your wants, and often, minimal responsibilities to shoulder. But did you know that your 20s are also a golden time to shape your financial future? The investments you make during your youth can become your financial companion in old age. This article will help you understand how to start investing in your 20s and highlight the common mistakes to avoid during the journey. 

Here’s How You Can Start Investing In Your 20s:

1. Start With A Demat And Trading Account

According to the Investor Behaviour Index (IBI, 2025) report issued by StockGro, nearly 45% of young Indians prefer stocks as their primary investment. Although volatile, the stock market offers the potential for high returns alongside liquidity. That’s why many consider stocks one of the best things to invest in during the 20s. 

To begin investing in stocks, you must have a demat and a trading account. 

Short for a dematerialisation account, a demat account holds your financial securities in electronic form. While a demat account is only mandatory for a select few investments, such as stocks and Exchange-Traded Funds (ETFs), having one offers several benefits. For instance, you can track and manage different investments in a single place. Apart from ease and convenience, you get enhanced security as there is no risk of losing physical certificates. 

A trading account acts as an intermediary between your bank account and your demat account. It allows you to buy and sell securities listed on stock exchanges. 

You can open a demat and trading account either offline or online by reaching out to any depository participant registered with the Securities and Exchange Board of India.  

2. Begin With Small Investments

While youth is about speed and chasing big dreams in a short span, starting small and staying consistent is wise. Investing a large sum at once can feel daunting and demotivating. However, smaller contributions help you move toward a secure life at your own pace and comfort. They also build confidence and foster financial discipline. 

Do not underestimate the power of small investments. After all, those little drops of water go on to make the mighty ocean. Even modest investments can grow into a substantial corpus over time, thanks to compounding—you not only earn returns on your principal but also on the returns that keep adding to it. 

For instance, a monthly contribution of ₹5000 can compound to more than ₹85 lakh over 25 years, assuming a return rate of 12%. Your total investment, in this case, will be just ₹15 lakh over two and a half decades. However, your gains will amount to more than ₹70 lakh.

3. Use SIPs In Stocks Or Mutual Funds

Starting small is easy, but staying consistent can be difficult, especially for the youth, who often face a strong temptation to spend. Thus, automating your investments is wise so that you never miss an instalment. Systematic Investment Plans (SIPs) can help here.

SIPs allow you to invest a fixed amount at regular intervals, typically every month. The amount is automatically deducted from your bank account and invested in your chosen instrument. SIPs not only promote financial discipline but also help average out the cost of investment over time. This can potentially increase your take-home returns. 

While mutual fund SIPs are quite popular, you can also invest in the stock market through SIPs.

You can start a mutual fund SIP directly by visiting your fund house’s branch or website. It is also possible to invest via intermediaries such as mutual fund distributors, banks, or online investment platforms. Your minimum investment can be as low as ₹500 per month. Some fund houses even accept monthly SIPs of ₹100. 

To start an SIP in stocks, you can visit your broker's website or mobile app and follow the instructions. You can choose between an amount-based SIP or a quantity-based SIP. While the first option allows you to invest a fixed amount periodically, the second one lets you buy a fixed number of shares. 

Additional Read: How Does Systematic Investment Plan (SIP) Works?

4. Focus On Learning And Research

As the famous saying goes, “An investment in knowledge pays the best interest”. The more you learn about personal finance, the better equipped you will be to make informed decisions. You can find several resources online that will help deepen your understanding. These include books, videos, podcasts, and even finance apps. You can even reach out to seasoned investors among your family and friends for investment insights. 

5. Avoid Common Mistakes

When it comes to investing, even a small slip can lead to significant losses. Here are some mistakes to steer clear of: 

• Not starting early: The biggest advantage that young investors have over others is time. The earlier you start, the more time your money gets to grow. 
• Not having a long-term perspective: Young investors chase quick returns, which can lead to losses. A long-term investment perspective helps you ride out short-term market fluctuations. 
• Following the herd: Randomly investing based on what others are doing may not be a good idea. Each investment should be made only after careful analysis of your financial goals and risk appetite. 
• Not diversifying enough: Too much of anything is bad. If you invest all your money in one security, you risk losing everything. However, if you spread your investments, the profits from some can offset the losses from others. 
• Timing the market: It is said that time in the market is better than timing the market. Young investors who have just started and have limited market knowledge should avoid timing the market. One wrong decision or misjudgement can lead to losses.   
• Ignoring tax planning: It is important to include tax-saving investments in your portfolio to reduce your overall tax outgo. You should also consider the tax implications on withdrawals, as they ultimately affect your take-home returns. 
• Not reviewing your investments: You must review your investment portfolio regularly to ensure your investments are on track and well-aligned with your financial goals. Rebalance if needed.

Additional Read: Portfolio Diversification: How it reduces Market Volatility and Risk?

Conclusion

Investing at a young age can do wonders for your long-term wealth. However, it is essential to move cautiously. By starting early, seeking knowledge, staying consistent, and avoiding pitfalls, you can ensure a financially secure future.