Your twenties are one of the greatest financial advantages you will ever have — not necessarily because you are working hard to make good income, but because you have time. Time allows your investments to compound, your knowledge to grow, and small, consistent contributions to become meaningful wealth.
However, successful investing is not about chasing the next hot stock or trying to get rich overnight. It is about building a disciplined financial foundation, investing consistently, and learning how to identify exceptional businesses at attractive prices. Here is a practical game plan to get started.
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1. Build your financial safety net first
Before putting money into the stock market, establish an emergency fund. Aim to save at least three to six months of essential living expenses in a readily accessible, high-interest savings account.
Why does this matter? Life is unpredictable. Unexpected job loss, car repairs, medical expenses, or other emergencies can happen at any time. Without a financial cushion, you may be forced to sell investments during a market downturn, potentially locking in losses.
An emergency fund gives you financial breathing room and, more importantly, the flexibility to remain invested when markets become volatile.
Once your emergency savings are established and high-interest debt is paid off every month, you can start putting your money to work in the market.
2. Start dollar-cost averaging into market-wide ETFs
For new investors, broad-market exchange-traded funds (ETFs) are an excellent starting point. Rather than betting on individual companies, you gain exposure to a diversified collection of businesses through a single investment.
Consider options such as the iShares Core Equity ETF Portfolio, which provides globally diversified, all-equity exposure; State Street SPDR S&P 500 ETF Trust, which tracks the S&P 500; State Street SPDR Portfolio S&P 500 Growth ETF, which focuses on U.S. growth stocks; and iShares S&P/TSX 60 Index ETF, which provides exposure to major Canadian companies.
Try not to overlap exposure with your ETFs, which aim to diversify your investments on day one. Though remember that even diversified equity ETFs can experience significant declines.
A useful long-term investing strategy is dollar-cost averaging (DCA). Instead of investing a large amount all at once, contribute a fixed amount at regular intervals, such as every payday or every month. When prices fall, your contribution buys more units; when prices rise, you’d buy fewer shares.
DCA encourages consistency, reduces the temptation to time the market, and helps turn investing into a sustainable habit. Over decades, consistent contributions and reinvested distributions could support meaningful wealth-building.
3. Graduate to quality businesses at reasonable valuations
Once you have established your ETF portfolio, consider gradually learning how to evaluate individual businesses. You can start with a top-down approach.
Begin by identifying attractive industries with long-term growth potential, favourable economic trends, and durable demand. Next, narrow your search to companies with competitive advantages, capable management teams, strong balance sheets, and sustainable cash flows. Finally, examine valuation.
A wonderful company is not automatically a wonderful investment at any price. Look at earnings, cash flow, debt, growth prospects, and valuation multiples. Your goal should be to purchase quality businesses at reasonable or discounted valuations, leaving room for a margin of safety.
One good example is Brookfield (TSX: BN), a global alternative asset manager with investments across infrastructure, renewable power, real estate, and other essential businesses. Its diversified operations, global investment platform, and track record of execution, driving long-term double-digit growth, make it worth a closer look. For example, with dividend reinvestment, over the last decade, the stock delivered north of 14% per year, transforming an initial investment of $1,000 into $3,842.
The growth stock has its fair share of ups and downs, though. So, investors might be wise to consider it on meaningful market dips. At below $57 per share at the time of writing, the analyst consensus suggests the stock trades at a discount of about 16% such that it may be a reasonable buy for long-term investing.
Patience is essential. Keep a watchlist, establish your desired entry price range, and avoid chasing stocks when enthusiasm pushes valuations beyond what fundamentals justify.
Investor takeaway
Your twenties are the ideal time to develop lifelong investing habits. First, build an emergency fund. Second, establish a diversified ETF portfolio through consistent dollar-cost averaging. Third, develop the skills to identify quality businesses and buy them at sensible prices.
You do not need to predict the market or find the next multi-bagger. Instead, start small, stay disciplined, keep learning, and let compounding support wealth-building over time. The best investment strategy is one you can stick with for decades.
