First steps to investing at 18 or 21 years old
Investing for Beginners

First steps to investing at 18 or 21 years old

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First steps to investing at 18 or 21 years old can seem daunting, but it’s simpler than you think. Investing early allows your money to grow through the power of compound interest. Even small amounts invested regularly in your teens and 20s can add up to significant savings by retirement age. Here are some tips to get started:

Set Financial Goals

  • First steps to investing at 18 or 21 years old should begin with setting clear financial goals. What are you investing for? Retirement? A house? Education expenses? Know your time horizon and risk tolerance.
  • Short-term goals within 5 years may be better suited for savings accounts or CDs, not the stock market.
  • Long-term goals like retirement are well suited for investing in the stock market which averages ~10% annual returns.

Start Budgeting

  • Track your monthly income and expenses to see where your money is going. Look for areas to save – even small amounts add up.
  • Pay off any high interest credit card or loan debts first before investing.
  • Build an emergency fund with 3-6 months of living expenses before you invest.

Open a Retirement Account

  • Open a Roth IRA or 401k if offered by your employer. In 2023 the maximum you can contribute is $6,500 per year to a Roth IRA and $22,500 to a 401k.
  • First steps to investing at 18 or 21 years old is putting retirement first! Your money grows tax-free in a Roth IRA.
  • Even $50/month invested regularly from ages 18-65 can grow to over $500k (assuming a 10% annual return).

Choose Investments

  • Stick with low fee index funds and ETFs. Avoid high fee mutual funds and advisors.
  • Good options are total US and total international stock market index funds.
  • Use a target date retirement fund if you want a hands-off approach. The asset mix automatically adjusts as you near retirement.

Here’s a sample starter portfolio with index funds, expense ratios, and allocation:

Fund Expense Ratio Allocation
VTI – Vanguard Total Stock Market Index Fund ETF 0.03% 50%
VXUS – Vanguard Total International Stock Index Fund ETF 0.07% 30%
BND – Vanguard Total Bond Market Index Fund ETF 0.035% 10%
VNQ – Vanguard Real Estate Index Fund ETF 0.12% 10%

Use a Retirement Calculator

  • Determine if you are saving enough using an online retirement calculator.
  • Play around with different saving rates and assumed rates of return to see the impact.
  • Use calculator results to determine how much you need to invest each month.

Open a Taxable Brokerage Account

  • Open an individual taxable brokerage account if you max out retirement accounts.
  • Invest in the same index funds using a 3 fund portfolio or lazy portfolio.
  • You’ll pay taxes on dividends and capital gains, so hold in a retirement account if possible.

Also Read:


Automate Investing

  • Automate regular investing from each paycheck into your investment accounts. Even $25-50 per pay period adds up.
  • Reinvest dividends to benefit from compounding growth.
  • Annual 401k contribution limits increase over time. Boost your contribution 1% yearly.


First steps to investing at 18 or 21 years old seems hard, but gets easier over time. Here are some useful resources:

The key takeaways for first steps to investing at 18 or 21 years old are:

  • Start early and invest consistently
  • Use tax-advantaged accounts like 401ks and IRAs
  • Stick to low-cost diversified index funds
  • Automate your regular investments
  • Let compound interest work its magic over decades!

What are you waiting for? Now is the time to begin your investing journey!


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