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3 Major Investment Lessons I Learned In My 20’s

On my 20th birthday, I opened my first mutual fund. As a part-time night teller earning $8.25 per hour, I was so proud of myself. Things didn’t go quite as I’d planned them, however. Throughout the next decade, I learned many investment lessons from my own choices and actions – as well as others’.

I wish I could say all of the lessons were positive. But, mistakes are excellent teachers, too. Doggone it.

So, here are some things I learned. You may agree or disagree with this list. It’s likely your own list would look different. That’s alright. Once you’ve read through my list, I’d love to hear your thoughts in the comment section below.

3 Major Investment Lessons I Learned In My 20’s

First of all, should investing even be on your radar when you’re in your 20’s?

ABSOLUTELY. I may not have handled it perfectly, but I plan to teach my kids about investing while they’re still under my roof. I don’t want their eyes to glaze over when someone from Human Resources starts asking them about starting a 401K. What I really don’t want is for them to reach adulthood and assume this is all information for when they get older. 

As you’ll see in my list below, time is your friend in the world of investing.

On that note, let’s begin.

1. It’s vital that you understand the power of compound interest. defines compound interest like this:

Interest that is added not only to the principal of a loan or savings account but also to the interest already added to the loan or account

Or more simply:

Interest paid on interest.

Basically, if you get on board with the concept and start investing early, it can make you rich.

3 Major Investment LessonsFor example:

If you put $1000 into a Roth IRA (Individual Retirement Account) every year from age 20 to 30, then never add another dime, the interest would compound on itself. We’ll say the IRA earns an average of 10% annually. By the time you’re 65, your estimated total would be:


Conversely, if you wait until you’re 40 to begin investing and save double the money for double the time ($2000 every year for 20 years), guess how much you’d have when you’re 65?


Hopefully, this example shows the power of investing early. I first heard of it as the “Ben & Arthur” lesson from Dave Ramsey’s best-selling book, The Total Money Makeover. This was also the book that helped my husband and I navigate the deep waters of getting out of debt in 2012.

If you’d like to learn more about compound interest and how to invest wisely, check out Dave’s book here.

Want to crunch some of your own investment numbers for free? Head over to this investment calculator and discover the power of compound interest in your own finances.

2. Don’t use investing as an emergency fund.

I’m cringing. Can you tell?

I’ve never written about this, but here we go.

As I mentioned earlier, I began contributing to a mutual fund when I was 20. My financial adviser was so impressed with me. One of the earliest of my investment lessons was starting out so well…

I didn’t really have a handle on anything else financially (saving, budgeting, spending), but it felt good to have this one in check.

Three years into steadily growing my investment, I dipped into it. That was the beginning of the end. I moved across the country and barely had enough money in savings for a pair of shoes. I even had a full-time job with minimal expenses up until the move.

I could have quickly saved $1000 for the move and for emergencies. Moving, after all, is not typically an emergency.

Perhaps I can chalk this up to a life lesson: Once you dip into your investment, it’s likely you’ll do it again.

By the time I was 25, my mutual fund was empty. It was never very large, but it certainly would have grown over the years. Plus, I liked the idea of having an investment at retirement that I started when I was so young.

Life happens.

Investment lessons happen.

3. Ask as many questions as it takes to fully understand your investments.

Meet with a financial adviser regularly. Ask your questions. Don’t assume you have to create some complicated portfolio that taps into the fourth dimension or has you investing like a day trader. Some people love that. If you want something simpler, it doesn’t mean you’re simple.

I highly recommend finding an adviser with a teacher’s heart. Find someone who will take the time to explain things to you (without making you feel like gum on her shoe).

If there is one thing that made me feel more confident and responsible about investing in my 20’s, it was understanding what I was doing, how it worked, and why.

Must be why the show “How It Works” is so popular.

After muddling up my first investment, I opened a Roth IRA shortly after and have been contributing to it (untouched!) ever since. When I left my job at the bank to be a stay-at-home mom and freelance writer, I rolled my 401K into the Roth and told myself to never use that money in place of my emergency fund again.

I strongly encourage you to view investing as a part of your life, even if it has to be a small percentage right now. You’re planing a seed for future growth, investment lessons, and healthier financial habits.

How did you first learn about investing? Who taught you?

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My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

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