If I Were Starting Over in the Stock Market in My 20s, This Is the First Investing Move I'd Make

It’s usually only with the benefit of hindsight and wisdom do we understand what we should have done and what we shouldn’t. Investing is a great example. Often times, we do the best we can and hope that what we’re doing will get us where we want to be down the road. Unfortunately, as the saying goes “we don’t know what we don’t know.”

As I’m in my early 50s now, I can look back at my 30 years in the financial markets and recognize there are a few do-overs I wish I could have back. I shouldn’t have gotten overzealous buying tech stocks at the end of 1999. I wish I’d bought Bank of America when it was trading for around $3 a share back in 2009.

But most of all, I wish I had automated my investing process a little better and I wish I had been more aggressive with how much I saved when I had the most time on my side.

Make investing automatic as early as possible

A lot of people when they get their first real job think about all the things they need or want. Maybe it’s a car. Maybe it’s furniture for the house. Maybe you just want to enjoy being able to order DoorDash every night.

It’s easy to push investing for retirement to the back burner. If you’re in your early 20s and not going to need the money for at least the next 40 years, there’s always time to invest later. Right? There is. But the biggest bang for your long-term investing buck comes earliest. Starting right away gives you the most time to let long-term compounding do its thing.

Here’s a good example. Imagine you invest in the Vanguard Total Stock Market ETF (VTI +0.65%) and are able to get a 10% annual return. If you start saving $300 a month at age 25 and continue non-stop until your age 65, you’ll have accumulated around $1.9 million. But if you wait until age 35 to start saving $300 a month, at age 65 you’ll only have watched your investment to grow to $678,000.

That 10-year delay cost you over $1 million.

Here’s another stat. If you start at age 35 and want to still get to the $1.9 million mark by the time you get to 65, you wouldn’t have to set aside just $300 a month. You’d have to invest $840. The early years in your life is where you reap the biggest rewards. The more work you do to save in your 20s means more financial flexibility in the later part of your life.

Max out those retirement accounts

Tax-advantaged accounts are some of the best deals going for savers. Not only are you accumulating long-term wealth, the tax savings could make your accounts that much more valuable.

If your primary savings vehicle is a 401(k), some other workplace retirement plan, or a traditional or Roth individual retirement account (IRA), try to save the maximum amount allowed if at all possible. Or if the max is too much for you right off the bat, start saving what you can today and try to increase how much you set aside gradually until you hit the max.

After you start saving for a while, increasing your contribution step-by-step becomes easier. This consistency of saving automatically and letting your accounts grow over time will be more important than what you’re actually invested in. You’ll hear a lot of people talk about what stocks to buy and how to find the next big home run. In reality, investing in something like the Vanguard Total Stock Market ETF will do 90% of the work for you.

Simply being invested in stocks is important. But starting early, investing as much as you can, keeping it automated, and focusing on the long-term are what will get you to the finish line.