How to start investing after college

You know you want to invest. You know you have to invest. But honestly, how do you start investing? who do you trust Do you pay someone to help you? How do you know you won’t be ripped off? Or worse – how do you know you are not going to lose all your money? If you’re looking to invest after college, here are our thoughts.

For 20-year-olds, investing is important and you know it. Time is on your side in your 20s, and the more you save and invest now, the better off you’ll be later.

But honestly, it’s confusing to start investing after college. There are so many options, tools, thoughts, blogs to read about and more. what the hell are you doing

I will share my thoughts on what you should do to start investing after college in your twenties when you are 22-29 years old. Let’s dive in.

Why invest early?

According to a Gallup poll, the average age of investors who start saving is 29. And only 26% of people start investing before the age of 25.

But the math is simple: It’s cheaper and easier to start saving for retirement in your 20s than it is in your 30s or later. let me show you

If you start investing at age 22 with just $3,600 per year and assume an average annual return of 8%, you’ll have $1 million by age 62. But if you wait until age 32 (just 10 years later), you’ll have to save $8,200 a year to reach the same goal of $1 million by age 62.

This is how much you would need to save each year, based on your age, to reach $1 million by the time you are 62.


Amount To Invest Per Year To Reach $1 Million


















Just look at the cost of waiting! If you just wait from 22 to 29, it will cost you $2,800 more per year assuming the same rate of return to achieve the same goal.

That’s why it’s important to start investing early, and there’s no better time than after college.

Do you need a financial advisor?

So if you want to start investing, do you need a financial advisor? Honestly, for most people, they don’t. But many people cling to this need for “professional” advice.

But are there circumstances in which it might make sense to talk to a financial advisor? Yes, in some cases. I believe that if you need help creating a financial plan for your life, it can be worth speaking to a financial planner (not a financial advisor).

Simply put, if you’re struggling with creating your own financial plan (like saving, budgeting, investing, insuring yourself and your family, creating an estate plan, etc.), it might make sense to sit down and pay someone to help you.

Note, however, that there is a difference between creating a financial plan that you execute and paying a fee for, and having a financial advisor take a percentage of your money under management. For most investors after college, you can use the same plan for years to come.

In fact, we believe meeting with a financial planner only makes sense a few times in your life based on your life events. Because the same plan you make should last until the next life event. Here are some events to consider:

After graduation/first job
Marry and pool money
have children
If you come into significant wealth (e.g. inheritance)
approaching retirement
You see, the same plan you make after graduation should carry you through to marriage. The same applies to the next life event. Why pay an ongoing fee every year when nothing changes for years?

Robo advisor or self-directed?

So if you’re not choosing a financial advisor, should you choose a robo-advisor? This could be a great option if you “don’t really want to think about investing, but know you should.”

Honestly, you still have to think about it, but using a robo-advisor is a great way to let an automated system do everything for you. Plus, these companies are all online, so you don’t have to worry about making appointments, walking into an office, and dealing with a consultant you like or dislike.

Robo advisors are fairly straightforward tools: they use automation to set up your portfolio based on your risk tolerance and goals. The system will then continuously update your accounts for you automatically – you don’t have to do anything.

All you do is deposit funds into your account and the robo-advisor takes it from there.

If you want to go the robo-advisor route, we recommend using Betterment.

Betterment – ​​Betterment is a great robo advisor for young investors. They make investing easy for beginners by focusing on simple asset allocation, goal setting features, and low-cost portfolio management. Click here to view Betterment.

What type of account should I open?

That’s what makes investing so complex – there are just so many different factors to consider. We’ve touched on a few, and now let’s explore which account you should open.

Employer plans – 401k or 403b
For recent graduates, focus on your employer first. Most employers offer a 401k or 403b retirement plan. These are company-sponsored plans, meaning you contribute and your company usually contributes accordingly.

I strongly recommend that you always contribute up to the appropriate post. If you don’t, you’re essentially leaving free money on the table and giving yourself a pay cut.

If you agree to contribute up to your employer, my next challenge is to contribute the maximum amount allowed each year. As of 2022, that amount is $20,500 for those under the age of 50. Just imagine how much money you will have if you always max out your 401,000 posts.

Make sure you keep up with 401k post limits.

Individual Retirement Accounts – Roth or traditional IRAs
Next, look at opening an individual retirement account, or IRA. There are two main types: a traditional IRA and a Roth IRA. The advantage of these accounts is that the money in the account grows tax-free until retirement. The downside is that there are restrictions on withdrawing the money before retirement. If you’re saving for the long term, these accounts make sense. But don’t use them if you want to take the money in just a few years.

The traditional IRA uses pre-tax money to save for retirement (meaning you get a tax deduction today), while a Roth IRA uses after-tax money. In retirement, you’ll pay tax on your traditional IRA withdrawals, but you can withdraw tax-free from the Roth IRA. That’s why many financial planners love a Roth IRA.

In 2022, the contribution limit for IRAs is $6,000. You should focus on contributing the maximum each year. Keep an eye on IRA contribution limits each year.

Health Savings Accounts (HSAs)
If you have access to a health savings account, many plans allow you to invest in your HSA. We love using an HSA to invest because it’s like using an IRA. There are a lot of great tax breaks if you keep the money you invested and don’t spend it on health care today. Just invest and let it grow.

If you have an old HSA and don’t know what to do with it, check out this guide for the best places to put your HSA. You can move your HSA at any time, just like you would an old 401k.

Finally, make sure you’re trying to maximize your HSA contributions. Here are the HSA contribution limits.

How to balance contributions to multiple accounts beyond A 401k and IRA
There is a “best” order of operations, what accounts to contribute, and how much to do at once. We’ve rounded up the best practices for saving for retirement in a beautiful article and infographic that you can find here.

Where to invest if you want to do it yourself
Okay, so you have a better sense of where to get help, what account to open, but now you really need to think about where to open your account and where to make your investments.

When it comes to where to invest, consider the following:

Low costs (costs include account fees, commissions, etc.)
Choice of investments (in particular, look for commission-free ETFs)
Usability of the website
Great mobile app
Branch availability (it’s still nice to walk in and speak to someone if you must)
Technology (is the company at the top or always behind the industry)
We recommend using M1 Finance to start investing. They allow you to build an inexpensive portfolio for free! You can invest in stocks and ETFs, set up automatic transfers, and more—all for free. Check out M1 Finance here.

We have reviewed most of the major investment companies and compare them here at our Best Online Stock Brokers And Invest Apps. Don’t take our word for it, explore the options for yourself.

How much should you invest?

A common question when looking to start investing after college is “how much should I invest?”. The answer to this question is both simple and difficult.

The simple answer is simple: you should save until it hurts. This was one of my key strategies and I like to call it Front Loading Your Life. The basic premise of this is that you should do as much as you can early on so that you can roll out later in life. But if you save until it hurts, that “later” could be your 30s.

So what does “save until it hurts” mean? It means a few things:

First, you should make saving and investing compulsory. The money you want to invest goes into the account before anything else. Your employer already does this with your 401k, so do it with an IRA too.
Second, challenge yourself to save at least $100 more than what you’re doing right now – let it hurt.
Third, work to either budget to hit that extra $100, or start the side hustle and earn extra income to hit that extra $100.
Here are some goals for you:

Maximize your IRA contribution: $6,000 per year or $500 per month
Maximize your 401,000 contribution: $20,500 per year or $1,708 per month
Max Out Your HSA (if you qualify): $3,650 for singles per year or $7,300 per family per year
If you’re striving to earn additional income, maximize your SEP IRA or Solo 401k
Investment allocations in your 20s
This is one of the hardest parts of getting started investing — actually deciding what to invest in. It’s not really difficult, but it scares people the most. No one wants to “screw it up” and make bad investments.

That’s why we believe in building a diversified portfolio of ETFs that match your risk tolerance and goals. Asset allocation simply means the following: the allocation of your investment money is a defined approach that suits your risk and objectives.

At the same time, your asset allocation should be easy to understand, inexpensive, and easy to maintain.

We really like Boglehead’s Lazy Portfolios, and here are our three favorites depending on what you’re looking for. And while we give some examples of ETFs that might work in the fund, take a look at what commission-free ETFs you might have access to that offer similar investments at a low cost.

You can create these portfolios quickly and easily for free at M1 Finance.

Conservative long-term investor

If you’re a conservative long-term investor who doesn’t want to deal with much in your investing life, check out this simple 2-ETF portfolio.

% Allocation




Vanguard Total Bond Market Fund



Vanguard Total Stock Market Fund


Moderate long-term investor

If you’re okay with more volatility in exchange for potentially more growth, here’s a portfolio that includes more risk through international exposure and real estate.

% Allocation




Vanguard Total Bond Market Fund



Vanguard Total Stock Market Fund



Vanguard International Stock Index Fund



Vanguard REIT Index Fund


Aggressive Long Term Investor

If you’re okay with more risk (i.e. potentially losing more money), but want higher returns, here’s an easy to maintain portfolio that could work for you.

% Allocation




Vanguard Total Stock Market Fund



Vanguard Emerging Markets Fund



Vanguard International Stock Index Fund



Vanguard REIT Index Fund



Vanguard Total Bond Market Fund



Vanguard TIPS


Things to consider when allocating assets

When investing in your portfolio, remember that prices will always change. You don’t have to be perfect at these percentages – aim for within 5% of each. However, you must ensure that you monitor these investments and rebalance them at least once a year.

Rebalancing puts your allocations back on track. Let’s say international stocks shoot up. That’s great, but you could be well over the percentage you want to hold. In that case, sell a little and buy other ETFs to offset and get your percentages back on track.

And your allotment can be fluid. What you create now in your 20s may not be the same portfolio you want to have in your 30s or later. However, once you create a plan, you should stick to it for a few years.

Here’s a good article to help you plan how to rebalance your asset allocation each year.

Final Thoughts
Hopefully, the biggest benefit you’ll see if you want to start investing after college is that you get started. Yes, investing can be complicated and confusing. But it doesn’t have to be.

This guide provides some important principles to follow so you can start investing in your 20s, not later in life.

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