Whether you're trying to get a head start on retirement or just want to build your personal wealth, your 30s are a great time to start investing. You'll be more established in your career, making a salary comfortable enough to afford you extra cash to invest, but will still be young enough to reap the benefits of compound interest.
So what types of investments should you be making?
The Big Picture
Let's start with a high-level vision of a successful investment plan for the average person in their 30s. Though each individual will have unique goals of their own, if you're following a general path, you should be planning for a long-time horizon--30 years or so--and optimizing your investments to pay off over that time horizon.
Trying to get rich by timing the market or focusing on short-term investments isn't going to pay off. We also need to consider investments accessible to the average professional; most of us won't be able to afford an apartment complex, or be able to invest in promising startups.
So what are the most important investments for 30-something professionals to make?
1. Pay off high-interest debt.
While not an investment in the conventional sense, you should have a plan to pay off all your debts in your 30s. Before you use your money to earn a 7 percent annual return, you should use your money to avoid a 15 percent accrual of interest on your credit cards. That doesn't mean you have to wait to start investing until all your debts are paid off; in fact, some debts with low interest rates are good to keep. But you should work on getting high-interest rate debt off your plate before focusing on other investments.
2. Buy a house.
Buying a house isn't the right move for everyone, and it can be a complex process. However, in markets with reasonable prices, it's often financially advantageous to buy a house instead of renting, so you can start building equity instead of just losing your rent money every month. Choose a neighborhood with high growth potential to maximize the appreciation value of your home, and make sure to get a fixed-rate mortgage with a substantial down payment (so you can avoid paying PMI).
3. Utilize tax-advantaged accounts.
Take advantage of tax-advantaged accounts as early as possible. These accounts are designed to help you invest for your retirement by making your contributions or earnings exempt from taxes. If your company offers a 401(k) with a company match, your first priority should be maxing out that match; it's basically free money, and your contributions will come out of your gross pay (rather than your net pay). Then, turn your attention to a Roth IRA, which will shield you from paying taxes when you cash in the earnings on your account.
4. Stocks and index funds.
Within those tax-advantaged accounts, make sure you're investing in stocks, including stock-based index funds. Stocks may seem like they're inherently risky, but don't let yourself be intimidated. As long as you're diversifying your portfolio with companies of different sizes and from different industries, or are investing in index funds that contain dozens of stocks, your growth rate will average out to be positive over the course of many years.
Cryptocurrencies may seem like a fad, but there's no denying their enormous potential, as the world witnessed in late 2017 when cryptocurrency prices skyrocketed. While it's rare to see investments appreciate in value so rapidly, there's something to be said for diversifying your portfolio with high-risk, high-reward assets when you're young. If the volatility of traditional cryptocurrency is too much for you, consider new developments like TrustToken's stablecoins, which are designed for more stability as a store of value, due to being backed with fiat currency. Cryptocurrencies are not the right investment for every 30s-aged investor, but they can be a valuable addition to a balanced portfolio.
You should also make sure to have some bonds in your portfolio. Unlike stocks, bonds aren't often susceptible to price fluctuations with good or bad news. Instead, they function like loans to the government or individual companies, and are associated with a fixed interest rate. They aren't guaranteed investments, and their rate of return is lower than other investments, but they're much "safer" than stocks, so they deserve a place in your portfolio.
7. Other diverse investments.
You should also consider making other investments to diversify your portfolio. For example, you might purchase a rental property where you can earn a monthly profit in exchange for being a landlord, or you could purchase real assets like precious metals.
A portfolio with most, if not all, of these investments can help you make the most of your 30s--even if you don't have much extra money to invest. Stay consistent with whatever plan you adopt, and eventually, you'll see the fruits of your labor.