4 best ways to invest in your 20s

The absolute best way to invest money in your 20s and the exact systems to do it with.

Ramit Sethi

Ramit’s head superimposed on Marty McFly’s body as he stands in front of the DeLorean from Back to the Future in order to illustrate Time Machine investing — the best way to invest your money and time.

Imagine you had a time machine. It allows you to go back in time and change one thing about the past.

What would you do?

I bet plenty of us WANT to say something like:

  • Warn the Titanic about those pesky icebergs in the way
  • Kill baby Hitler
  • Tell Abraham Lincoln to Netflix and chill with Mary Todd instead of going to the theater

But the truth is, we’d all probably want to go back in time and give ourselves advice — probably on the best way to invest money and time.

Maybe you’d tell yourself to buy some Google stock the day they went public? Perhaps you’d just tell yourself to put down the fork and pick up a barbell more often? Or that maybe those skinny jeans you wore when you were 16 DIDN’T look as good as you thought?

No matter the case, there’s probably a world of things you’d probably want to tell yourself — and in doing so, you could impact your current life in a million positive ways.

Too bad time machines don’t exist…


That’s right. Little do you readers know, I’ve been hard at work constructing an advanced piece of machinery that allows you to actually know exactly what you should invest in during your twenties. Hop inside, and I’ll show you how.

Ramit’s head superimposed on Marty McFly’s body as he stands in front of the time travelling DeLorean from Back to the Future in order to illustrate Time Machine investing — the best way to invest your money and time.

Best way to invest money: Time Machine Investing

If you’re in your twenties, or even your thirties, chances are you have no idea how you should be investing your money and time — and that’s okay. Life doesn’t come with a guidebook and many of us are expected to just sort of “figure it out” when we graduate college.

Well, I’m here to tell you there’s a way to know exactly how you should be investing your time and money: Ask someone older (like me).

It’s not exactly a flying DeLorean or an inter-dimensional Time Lord, BUT people who have been where you are before know exactly what we wish we should’ve invested in.

Seriously, ask your parents or an older friend of yours what they would have done if they were your age. They’ll probably tell you a bunch of things like:

  • “I wish I ate more healthily when I was younger. A big gut’s harder to get rid of when you’re old.”
  • “I wouldn’t have picked up cigarettes that summer after college. Awful habit.”
  • “I wouldn’t have stuck it out with that job that I hated for so long.”

It doesn’t even have to be anything bad. Hell, your dad might tell you something like, “I started investing in retirement during college and it was one of the best decisions I’ve ever made.” Advice like this can help spare you from tons of issues down the road…so why WOULDN’T you take it?

Well today, I’m going to let you in on exactly what I think someone in their twenties should be investing in.

Bonus: Want more advice on how to improve your finances? Check out my Ultimate Guide to Personal Finance.

Investment #1: Invest money to eliminate your debt

If you’re young and you have debt and you want to live a Rich Life in the future, your first order of business is to get rid of it. You can’t properly invest in yourself or your future if you have a mountain of credit card debt that you haven’t addressed yet.

Debt is the most common roadblock keeping people from finding success in their lives. That’s why I don’t allow anyone with debt to take part in any of my flagship courses, costing us millions each year.

If you’re in debt, it’s probably not even your fault. After all, we don’t come out of the womb knowing how credit cards work. There’s no “Paying off your loans 101” class in high school. And credit card companies aren’t trying to help you. In fact, they’re in the business to keep you in debt for as long as possible so THEY can make money.

Luckily, there are steps you can take to get out of debt no matter how much you owe.

I wrote an article detailing exactly how you can get out of it — but for now, I’m going to tell you that the first and best step you can take to getting out of debt is to simply be aware of how much you owe.

Seriously. That’s it. Though it may sound simple, finding how much you’re in debt is actually INCREDIBLY hard for many people to do.

This boils down to the simple fact that people feel guilty about their debt. They’d rather bury their heads in the sand and pretend their debt doesn’t exist than look at the reality of the situation and do something about it.

My advice to you: GET OVER IT.

This is exactly the attitude credit card/loan companies want.


I challenge you to step up and OWN your debt instead of letting it own you.

First step: Go through your account statements, call the companies, do whatever it takes to find out how much you owe on these bills. You can use this tool to track it (it’s the second link on this list). The chart looks like this:

A spreadsheet to help you keep track of how much debt you owe and for which company you owe them. Columns from left to right are as follows: Name of credit card, total amount of debt, APR, and monthly minimum payment. This tool is an essential investment of your time.
It’ll help you find out how much you owe to each company and what your interest rates are.

Stop right now and do this.


Congrats! Taking the first step is one of the hardest parts — now you’re well on your way to a Rich Life.

If your total debt number seems high, remember two things:

  1. There is a large group of people with MORE debt than you.
  2. From this day that number is only going to go DOWN. This is the beginning of the end.

If you need help getting out of debt, check out my absolute best resources on getting out of debt below:

BONUS: For even more systems on eliminating your debt, check out my 3-minute video below on how to negotiate your debt.

Investment #2: Invest money early and often for retirement

I can’t tell you how many people I’ve talked to tell me they wished they started investing in their twenties — though if you’re NOT in your twenties and you’re reading this, there’s still time.

After all, the single most important factor in ensuring a solid financial future is investing. The sooner you start, the easier it is to get rich. There’s more than 100 years of evidence in the stock market testifying to that.

Still don’t believe me? Let’s look at a real world example.

Say you’re 25 years old and you decide to invest $500/month in a low-cost, diversified index fund. If you do that until you’re 60, how much money do you think you’d have (assuming a 5% return)?

Take a look:

A graph showcasing the returns on an investment in a low-cost, diversified index fund over a period of 35 years.

That’s right. You’d be a millionaire after only investing a few thousand dollars per year.

Notice, I’m not talking about the Hollywood type of investing where hot-shot stockbrokers make huge multimillion dollar trades while yelling “SELL” into a phone for some reason.

A screenshot from the movie Wolf of Wall Street wherein Leonardo DiCaprio holds a phone to his year making deals while everyone in the room watches him.
I said you should invest in low-cost, diversified index funds over time. That’s because smart investments are about consistency more than anything else — not chasing hot stocks. Or other weird investments:

When it comes to long-term investments, there are essentially two ways you can do it — and I HIGHLY suggest doing both.

A 401k through your employer

Be sure to take advantage of your employer’s 401k plan by putting at least enough money to collect the employer match into it. This basically means that for every dollar you contribute, your company will match that (pre-tax!).

This ensures you’re taking full advantage of what is essentially free money from your employer. That match is POWERFUL and can double your money over the course of your working life:

A chart showcasing how much you can earn on your 401k from the age of 25 to 65. Columns from left to right are as follows: Age, your contributions, employer match, balance without employer match, and balance with employer match.

Roth IRA

Like your 401k, you’re going to want to max it out as much as possible. The amount you are allowed to contribute goes up occasionally. Currently you can contribute up to $5,500 each year.

I suggest putting money into an index fund such as the S&P 500 as well as an international index fund as well.

Note: If $500/month sounds like a lot, read all the ways you can free up that money with just a few phone calls.

Bonus: Want more advice on how to improve your finances? Check out my Ultimate Guide to Personal Finance.

Investment #3: Invest money for big purchases

The best time to grow a tree is 10 years ago. The second best time is today.

Man, it sounds like a cheesy motivational poster — but the adage is TRUE.

If you want to buy a house or a nice car one day, you don’t want to think about where you’re going to get the money the day you plan to buy it. You want that money to already be there.

That’s why I’m a HUGE proponent of automating your finances.

There are still people out there who have heard me harp on this for literal YEARS and still haven’t automated their finances. And why not? For a few hours of work, you can save yourself thousands of dollars down the road.

One reason many are averse to saving money is due to the pain of putting our hard earned cash into our savings accounts each month. That’s why we turn to automation. It’s a set-it-and-forget-it approach to your finances, allowing you to send all of your money exactly where you need it to go as soon as you receive your paycheck.

After all, if you had to track your spending and move money into savings every month it would eventually be one of those “I’ll get to that later…” things and you’d NEVER get to it.

And so, just like cutting out luscious, perfectly foamed 12 Corners lattes, we might put away money for savings once or twice — but if we have to make the decision EVERY paycheck, we’re setting ourselves up to fail.

That’s why automated finances work so well. You can start to dominate your finances by having your system passively do the right thing for you. Instead of thinking about saving every day — set it and forget it.

To do this, you need just one hour today to set everything up so your paycheck is divided into four major buckets as soon as it arrives in your checking account. They are:

  • Investments: I highly suggest you put your money into a Roth IRA. Like your 401k, you’re going to want to max it out as much as possible. The amount you are allowed to contribute goes up occasionally. Currently you can contribute up to $5,500 each year.
  • Savings: Here, you should use “sub-saving accounts” that you’ve created for long-term goals like your wedding, vacation, or down payment on your house. Many banks provide the option to create smaller sub-accounts in your normal savings account — perfect for goal setting.
  • Guilt-free spending: Make automatic payments for recurring services like Netflix, Birchbox, and gym memberships using your credit card. You’re going to have plenty of guilt-free spending money in here for things like the occasional night out or fun purchases you want to make.

    Be sure to log into your credit card’s website and set up automatic payments with your checking account so your credit card bill is paid off each month. You can rest assured that you will have enough money in your checking because you’ve already set up automatic payments with everything else.

  • Fixed costs: These are for bills that can’t be paid off with a credit card such as rent, electric, water, and gas.

Once that money is in your savings account, don’t touch it unless you’re ready to pay for your long-term goal (or if there’s a HUGE emergency).

For more information on how to automate your finances, check out my 12-minute video where I go through the exact process with you.

Investment #4: Your (constant) education

If there’s one thing that I hope my readers have gained from my blog, it’s that you should always be in a state of curiosity. Be inquisitive. Ask questions when you don’t understand something and don’t be afraid to seek out more information through books, courses, or schooling. It’s only then that you can hope to truly live your Rich Life.

And don’t just focus on things that you think are closely related to your career. I want you to approach education laterally. You’ll be surprised at the things you’ll be able to pick up that’ll help you in life and at the office.

  • Are you an investment banker? Go take an improv class and become better at public speaking (and cracking jokes with others).
  • Small business owner? Take a course in another language like Spanish or French. You might be able to broaden your audience that way.
  • Aspiring baker? Join that cool sci-fi writing workshop you saw online. At the very least, you’ll be able to craft solid business proposals.

Your thirst for education should be constant and voracious. I don’t care if you’re reading this in your twenties or your sixties. There’s always something new to learn that you can add to your well of knowledge to draw upon.

If you ARE in your twenties though, you have so much potential in your life to leverage — but only if you know what to invest in. So take advantage of the time machines around you and talk to older people who have been around the block a few times and know what worked out for them.

Want more lessons from THIS time machine? I have an offer for you: My Ultimate Guide to Personal Finance.


  • Master your 401k: Take advantage of free money offered to you by your company…and get rich while doing it.
  • Manage Roth IRAs: Start saving for retirement in a worthwhile long-term investment account.
  • Automate your expenses: Take advantage of the wonderful magic of automation and make investing pain-free.

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  1. arcanum

    I was wondering if you have a guide on annual mutual-fund investing? For example, I have not a clue when it comes to investing, stocks, bonds, mutual funds, etc. However after reading all the great advice on this site I am excited and want to start investing. I am 27yrs old and want to invest in something that will be fairly safe but will be rewarding also. I have already setup my finances and this is my next step. Any advice on mutual funds for those like me? Thanks again for the awesome advice!

    • Sheldon Sandbekkhaug

      Ramit's book "I Will Teach You To Be Rich" covers investing in index funds like you described. "The Bogleheads' Guide to Investing" is also a great resource. I take their advice so seriously that my portfolio is modeled on the index-based format.

  2. Misty Sawyer

    37 years old and have invested in state retirement and 401-k for 7 years….401-k interest has been about 11%….suggestions (Roth IRA, etc and/or higher savings account interest than my credit union)? Thanks…Misty

    • Vivek Pandey

      I can help u

  3. sam

    Hey thanks for the adivce. I was wondering if you could explain where you think it would be a good place to begin investing. Mutual funds, shares.etc

    • Derek

      Read Ramit's book.

    • Steve M

      Index ETFs. Simple and low fees. If nothing else, just put money in an S&P 500 Index Fund. They all track the same index, so just look for the lowest expense ratio.

      I haven't read Ramit's book, but that would probably be a good place to look when you have the time.

  4. Deb Thompson

    My husband and I are second marriage coupe. My husband is 58. We own our home worth about $200,00 and have no outstanding debt. We have $100,000 to invest and would like get around 8-10 percent in mutual funds (after fees) and we want to start withdrawing in 5 years ($8,000 a year) We don’t want to run out of money. Right now have what little money we have in CDs. What suggestions would you have regarding mutual funds that althoughI know the earning fluctuate — average 8-12% with minimum fees and how would this play out in five years when we want to start withdrawing a bit each year???

    • Steve M

      If your investment horizon is 5 years, the risk you need to take to earn 8-12 percent is too high. Anything that could make that much (most likely equities or equity funds– i.e. "stocks") could lose it as well. When your time horizon is 5 years or less, you don't have time for the market to swing back if it tanks (think 2007), so most experts would advise a safer investment (and there is no safe 8-12 percent return investment at today's interest rates).

      It's not the answer you want, but I'd look for ways to earn more and perhaps put that money in a more aggressive investment, knowing you have your "safe" money available to hold you over in the event of losses.

  5. debz43

    My husband and I are second marriage coupe. My husband is 58. We own our home worth about $200,00 and have no outstanding debt. We have $100,000 to invest and would like get around 8-10 percent in mutual funds (after fees) and we want to start withdrawing in 5 years ($8,000 a year) We don’t want to run out of money. Right now have what little money we have in CDs. What suggestions would you have regarding mutual funds that althoughI know the earning fluctuate — average 8-12% with minimum fees and how would this play out in five years when we want to start withdrawing a bit each year???

  6. Sereyna

    Just letting you know the article on survivorship bias is no longer available on its Web site.

    I appreciate all the information, thank you!!!

  7. ciara

    hi, my bank is calling me to invest in variable funds, i have about 63k in the bank and would like to earn about 100k by the years end please what can I invest in for better return my money is in dumb savings, little returns and checking what should i put my money in

    • bobby


  8. kim

    which one do you think about investing in mutual funds or a cD ? Please let me know so I can go about it

  9. Sangeeta

    Considering your 2nd largest reader’s age group is 30-39, and you want to increase the number of women who read your advice, please do consider adding more financial information for that age group and gender.
    There are a lot of women in their late 30’s who, like me, are looking for the next challenge in their life since they’ve already pinnacled at work and done the kids thing…
    now we are actually interested in learning about finance and not leaving that to the husbands. That, along with yoga is the new trend…

    • Tyler

      Sexist much? The article is fairly broad talking about anyone, male or female. You need to actually read before you start getting all pc on everybody.

  10. PiaP

    Hi, I am a regular follower of your articles. Just like other ones this article too is informative. I have started my investment plans with Fair Investments ( ) and will keep all your points in mind. Thanks for sharing.

  11. John

    I am 40years i want to invest #30,000 monthly for the next 5years where can invest,bond or shares

  12. Muna

    I’m a Nigerian living in Lagos. I’m 35 yrs old. I work with an Events Management company. I earn an equivalent of $880 per month. I’m financially illiterate but i do really want to develop myself and make money work for me.
    A few years ago, like 8 or 9yrs ago, as a fresh graduate, i did invest in some bank/company shares worth $125/$62.5 at that period but i don’t know what has become of them nor how to track it.
    Two months ago, i made a conscious effort to invest in a low capital investment fund called FBN Capital after listening to a radio programme. Now apart from making some commitments towards this investment i really do not understand how it all works and will really love to educate myself. I will appreciate if i can get tips, manual or stuff that can really help to become financial savvy.

  13. Muna

    I’m really glad i came across this. And I’m excited about it all and feel really motivated. Warm regards for your efforts. Looking forwards to your reply

  14. Evans Were

    I love this article, I really want to make some steps so money can work for me . I do admire investing. And I don’t know the best way to do it , I have ksh 100,000 to invest what is the best investment I can go for. Advice please.

  15. Minke

    I have been trying to figure out what the best will be. To invest in a mutual fund, an index fund or the exchange investments. I see u said that in a mutual fund i should expect 11% interest. Can u suggest a place to open a mutual fund? I just moved to america and i am 28. I recently sold my firat business so have some money i want to invest but donr know where. Please advice thank u

  16. rizwan

    paid to click earning

  17. jesse

    If you want to make some money then check out the S&P 500. I wish I was in it right now… had it at 7.80 four years ago and got married and sold it all. It’s still a great buy and will likely see 70 within ten to fifteen years. Dividend is 7.8 percent a year plus inflation on top of that.

  18. Jason

    Also, as you begin to make money, GUARD IT WITH YOUR LIFE! There are so many scams and stupid investments out there. Believe in yourself and make certain you’re not investing your money foolishly. This sounds like common sense yet it happens all the time.

  19. Pierre Robidoux

    Thank you for sharing. It’s very useful. Hope to hear more from you.

  20. Ravi

    I like your story.
    Thank…x for teach me

  21. Expert Soft

    Nice article,
    Make your dreams true about earning a lot of money here this company gave you the chance to get your own business start and also promote yours business

  22. Aminjhon

    Hi i have 70000$ how to work with my money and be a successful person in my economy.

  23. Logan L

    Hi I’m 16 years old and recently started investing in precious metals. I’m interested in investing my money in other stuff but have the foggiest idea on where to start. Can anyone help??

  24. Robert

    This. This is how you write an article! Well done.

  25. Joy Butler

    I agree how the article illustrates the importance of long term investing and managing risk. It is a great idea to take on long term investments in the earlier stages of life so they can grow to a high return. It is also good to worry more about hedging risk when you are approaching retirement and your risk tolerance is minimal. I think that long term insurance would be something to invest in middle stages of life because it provides security when the time comes to exit the workforce.

  26. Jerry G

    OK. What I wish someone had told me (made me do!) in my twenties. Save SOMETHING!!! Start NOW. NO MATTER WHAT. No matter how insignificant you think it is.

    I was a poor as a churchmouse musician trying to make it. Then had a family with all that expense. That's OK.Not complaining. BUT… I still should have saved SOMETHING! Anything!

    I finally started when I was 52. $50 per month into an IRA. AUTOMATIC. Increased as I could. When I hit $3000 I put it into Vanguard Index fund. Since inception – dollar averaging/compound interest – 10.4% (past 12 months gain 14.2%).

    Fast forward to now. 60 years old. $42,000. Pathetic given my age, I KNOW…

    But you know what? It's NOT ZERO.

    Read Ramit's book. Start saving now. Rock on with your bad self and your rich life.

  27. Noel

    Buy AAPL, GOOG, NFLX and AMZN. Don't ask, just do it. And back up the truck when you do.

  28. Tiffany Hughes

    This is great! I loved your advice about automatic investing and have most of my expenses set up to go out around the first of the month. I'm also following the "7 Jar system" that is outlined in "Secrets of the Millionaire Mind." Something I recently found out as well is that it's possible to earn double digit returns on a retirement account and grow it tax free! WOW, was I blown away! And for paying off debt, I've recently learned that it's possible to pay off student loans, mortgages, car loans, and credit card debt in a fraction of the time without changing your current monthly income and expenses. Though I don't have those (I used scholarships to cover my school after reading "Confessions of a Scholarship Judge" by Josh Barsch- and I currently rent), it was super fascinating to find out. The CashFlow 101 board game also helped me learn more about income, expenses, assets, liabilities, doodads, and money management. #4 is the best advice-always be learning and implementing what you learn.

  29. Eric

    My Advice to Millennials (I am a father of a millennial) — max out your investment in your 401(k). Invest in both taxable and tax free (401(k)) accounts. Invest every month. If you can't figure out what to invest in, the best investment is an S&P 500 fund. Forget actively managed funds. They will have one or two good years, which shows incredible well, but actively managed funds can't win over an S&P 500 fund if you invest on a monthly basis over a long period of time. Actively managed funds will also eat you alive from a capital gains perspective in a taxable account. My father and I both tried the latter and failed…