How to Create an Investment Portfolio in Your Early 20s

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Step1
Set goals. If your objective is retirement, calculate how much you’ll need vs. how much income you’ll have (pension plan, Social Security) when you retire.
Step2
Choose a strategy that will enable you to meet your goals. Brokers and others offer conflicting advice on the best way to allocate assets (or choose a mixed approach to investment), so talk to financial advisors, read financial newspapers and magazines, and visit financial Web sites. In short, do some research.
Step3
Pay yourself first. Set aside 10 percent of your annual income and invest it.
Step4
Take full advantage of your employer’s 401(k) plan, investing as much as you can in it.
Step5
Invest in an Individual Retirement Account or Keogh plan if you’re eligible.
Step6
Put your money in conservative investments at first; for example, mutual funds that buy a variety of blue-chip stocks. After you have a solid foundation, you can choose higher-risk investments.
Step7
Diversify. Buy a variety of investments; for example, if you’re investing in mutual funds, you might put 30 percent of your money in growth funds, 30 percent in aggressive growth funds, 20 percent in tax-exempt bond funds and 10 percent in money-market, checking and savings accounts.
Step8
Buy what you know. If you go beyond mutual funds and decide to buy individual stocks, invest in local companies that you know something about.

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