Investing in Your 30s: 4 Steps to Build Wealth in Your Peak Earning Years

We all have different goals in life, especially when we hit the age of 30, the prime earning years. Some want to start retiring early, while some are on their way to build their wealth. Financial experts have agreed that the best way to do both is to invest your hard-earned money.

Starting your investments in your 30s might be more challenging than when you were in your 20s because you might have more things to spend on, a family to raise, a business to grow, or anything that would require a huge chunk of your salary. But starting now is better than not doing it all.

Before you start investing, determine your financial goals first. They serve as a personal objective for how you will spend and save money. Identifying your goals will help you achieve them; you’ll know what to prioritize and do early on.

Knowing your short-term and long-term financial goals will help you realize how much you should invest, so consult with a financial planner to educate you on the basics: where to start, how much risk you can tolerate, and how long you’ll be able to reach your goals.

Determine What Type of Investor You Are

It is best to figure out how you want to invest your money. You would also have an idea of what consequences and challenges you might face in your investments. You can classify yourself as a DIY investor, passive investor, or active investor.

  • DIY Investor

The first type of investment is what we call the DIY investment. As the name suggests, you have to figure out how things work all by yourself, researching and handling your own stocks, and having complete control of your investment.

  • Passive Investor

The next one is the passive investment, which is the most common starting road to being financially dependent. It is a simple investment that doesn’t require expert knowledge since your goal is to match and not beat the market—a buy-and-hold strategy that purchases and then hangs onto mixed assets.

Some passive investing approaches are buying real estate at retail price, fixed asset allocation, and averaging down. This strategy fits people occupied with families, jobs, and many others that take up their time. It can also be fitting for entrepreneurs who are starting their businesses.

But the downside is that it lacks flexibility, and you may lack control of your financial security. Since you have no expertise background, it surpasses value-added opportunities. Although this might happen, it is better than not risking at all.

  • Active Investor

The last one on the list is the active investment. A passive investor usually starts from their foundation and crafts a strategy to beat the stock market’s average returns and take advantage of price fluctuations. They purchase investments and monitor their activity to exploit its profitable conditions.

This type of investment may not be for everyone since it requires a lot of time to make your money work for you. Active investors spend extra time due to their belief that building wealth is about the return on capital. However, it may be costly because of the transactions due to the constant buying and selling of stocks.

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Choose an Asset Class

There are many investment options, and choosing the best one for you might be a bit overwhelming. In finance, the riskier an investment is, the higher the return is.

This is sometimes true, but it’s better not to put your money in one asset class. Diversify your investments for lower risk and possibly higher returns. Asset class can be in the form of cash, real estate, bonds or fixed income where you lend money in an institution, stocks or equities of a company, commodities and precious metals like gold, jewelry, and oil, and other derivatives where you and another party is obliged to buy and sell an asset for a predetermined price.

Set Deadlines for Yourself

You need to learn to be financially organized if you wish to invest. You should set a deadline for your financial goals and keep a record of your spending and bank balances. Choose if you would opt for a short or long-term investment.

Sometimes, the goal in your 30s is to contribute a lot of your salary to both a 401(k) or 403(b) plan and an individual retirement account (IRA) if your goal is an early retirement, which is best to begin sooner.

Don’t Be Scared to Take Risks

There are a few decades left before you retire. You can use the time to do stocks that people close to retirement can’t afford because the underlying risks don’t necessarily mean a higher average return.

But do remember that all investments involve risks. If you let risk stop you, time would leave your side. The earlier you invest, the more time you can see its benefits.

In your 30s, it is better to start investing now. Make the most of your money by putting it in diversified assets that can give you less risk and a high return. Diversify your portfolio by having a mixture of fixed income, commodities, and stocks—whichever works for you. Just start now, research, or talk to an adviser if you must.

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