Get started with investing in your 20s

Think back five years to 2020. The pandemic disrupted every aspect of modern life, but one positive was that it also gave many young adults something unexpected: the time and space to rethink both how they want to live, and how to manage their money.

With commuting, holidays, and social spending suddenly on pause, many twenty-somethings found themselves saving more cash than ever before, especially when factoring in government support schemes like furlough which cushioned the financial blow.

Furlough also gave millions a glimpse of life with passive income, which contributed to a surge in first-time investors. Stuck at home with extra cash and time, many young people turned to investing apps and online forums to learn how to grow their money.

While the pandemic market movements were at times overhyped, many came away learning how to build wealth steadily over time through discipline, patience, and smart planning. And arguably, your 20s are the ideal time to begin.

When you start early, you have time, the most powerful investing advantage of all. Thanks to compound returns, even modest monthly contributions can grow significantly over decades of reinvestment. The earlier you begin, the less you may need to invest later to reach your goals —whether that’s buying a home, achieving financial independence, or simply enjoying peace of mind.

For example, investing just £100 per month from age 25 in a range of ETFs with an average annual return of 7% could grow to a pot of more than £240,000 by age 65. Waiting until you’re 35 could cut that number in half — time in the market is just as important as the initial amount invested.

Long-term investing isn't just for the wealthy or the retired. It’s a powerful tool for anyone in their 20s or beyond who wants to build a future where money works for them, and potentially one where work becomes optional.

How to start investing with us

For those looking invest in UK shares with us, here's a straightforward approach:

1. Learn more about shares
2. Download the IG Invest app or open a share dealing account online
3. Search for your desired share on our app or web platform
4. Choose how many shares you’d like to buy
5. Place your deal and monitor your investment

Investors look to grow their capital through share price returns and dividends - if paid.

But the value of investments can fall as well as rise, past performance is no indicator of future returns, and you could get back less than your original investment.

Step 1: Build Your financial foundation

Before you can start investing, you need to make sure you’re building on concrete, not sand. This usually starts with building an emergency fund — typically three to six months of living expenses — meaning you won’t need to sell any investments during a downturn or any unforeseen personal financial stress. You might keep this capital in a Cash ISA or money market fund, where it’s easily accessible and very low risk.

Next up, you might want to clear all high interest debt. Credit cards often charge more than 20% in interest, and it’s unlikely that any retail investor can consistently beat that as a rate of return, particularly when paying off the debt guarantees reduced interest payments.

Then you need to set clear, achievable personal financial goals. Think about what the things you’re investing for, from buying a car or first home, to starting a business or even early retirement. Understanding your own timeline helps to determine how aggressive or conservative your investments should be.

Some money invested for the longer-term can also be directed at higher risk, higher reward equities in a way that’s perhaps financially irresponsible for older investors who don’t have the time horizon to recover from a sustained downturn.

Step 2: Understand the basics of investing

In simple terms, investing is putting your money to work in vehicles like stocks, bonds, ETFs or real estate with the goal of growing your wealth over time. Unlike saving, which is lower risk but typically erodes purchasing power due to inflation, investing involves risk but offers the potential for higher returns.

Key concepts to grasp include:

• Risk vs reward — as a general rule, higher potential returns come with higher risks
• Diversification — it’s common not to put all your eggs in one basket but to spread your investments across different assets
• Asset allocation — a healthy mix of stocks, bonds and cash in your portfolio based on your goals and risk tolerance is popular
• Compounding — is the process of earning returns on your returns. The more time goes by, the more powerful it gets

You might also want to take advantage of free courses, investment books and reputable online content to continue learning — including our very own IG Academy.

Diversification is perhaps the key theme here. In times of financial turmoil, defensive stocks and dividend-paying companies often perform better than growth stocks. Gold typically retains its value during crises, though can underperform during an economic boom. And while no portfolio is immune to losses, many investors believe that diversification plays a key role in minimising the risk of permanent capital loss.

It's also crucial to review your portfolio regularly. Check your asset allocation, rebalance if necessary and if you can, perhaps try to increase contributions as your income grows. And if your goals change — for example, you get a pay rise and are looking ahead to early retirement — adjust your strategy accordingly.

Step 3: Choose the right investment accounts

There are several investing options to consider, each with their own advantages and drawbacks:

• Workplace Pension — if you're employed, a workplace pension is often the most tax-efficient way to start investing. Contributions are made before tax, which reduces your income tax bill. Most employers also match a portion of your contributions, which can compound significantly over time. However, access to pension funds is restricted; you typically can’t withdraw until age 55 (rising to 57 from 2028), making this a long-term investment vehicle
• SIPP: if you’re self-employed or want more control over your investments, a Self-Invested Personal Pension (SIPP) is a powerful alternative. You choose what to invest in, whether stocks, funds or bonds, and still benefit from tax relief, with the government topping up your contributions based on your income tax bracket. Like workplace pensions, SIPPs are hard to unlock until your mid-50s, so they’re best suited for retirement planning
• Lifetime ISA — For those under 40, the Lifetime ISA (LISA) offers a strong combination of flexibility and incentives. You can contribute up to £4,000 per year and receive a 25% government bonus, up to £1,000 annually. The LISA can be used to buy your first home (up to £450,000) or be withdrawn after age 60. Withdrawals for other reasons incur a 25% penalty, which may mean losing some of your original contributions
• Stocks and Shares ISA — Once you’re contributing to a pension and potentially a LISA, the next step is often opening a Stocks and Shares ISA. UK residents can invest up to £20,000 per tax year from net income across all ISAs, and any capital gains, dividends or interest are completely tax-free. You can withdraw funds at any time without penalties, making it well-suited to medium-term goals
• General Investment Accounts — Once you’ve used up your tax-free allowances in pensions and ISAs, you can invest through a general investment account (GIA). These accounts are highly flexible, with no limits on deposits or withdrawals. However, gains and dividends may be subject to capital gains and income tax

Step 4: Start small if you need to

You don’t need thousands to begin investing. Many start off with as little as £10. The key is to begin with smart, manageable choices that offer solid growth potential while minimising risk.

A great starting point is low-cost index funds and ETFs. These funds track entire markets, such as the S&P 500 in the US or the FTSE 100 in the UK. They offer built-in diversification, low management fees, and have historically outperformed most actively managed funds over the long term.

Popular options include the Vanguard Total Stock Market ETF, iShares Core FTSE 100 UCITS ETF, and various S&P 500 index funds. These provide exposure to top global companies, giving you both geographical and sectoral diversification from day one.

If you’d prefer a hands-off approach, we offer the IG Smart Portfolio — where we create and manage a custom investment portfolio for you based on your risk profile and financial goals. They’re especially useful for beginners who want a stress-free way to grow their wealth over time.

For those who enjoy research and analysis, investing a small portion of your portfolio in individual stocks can be both educational and rewarding. Naturally, you might want to focus on companies you understand and believe in for the long term. However, as a beginner, it’s common to limit this to no more than 10–15% of your overall portfolio to avoid unnecessary risk.

But as your portfolio grows, you might consider expanding into more specific areas like emerging markets, mid-cap stocks or thematic funds that align with your personal interests or values.

Remember that successful investing is about consistency, not perfect timing. Even fundamentally strong stocks can see sharp declines — like the tech sector did in 2022, when many companies lost over 30% of their value.

Step 5: Automate and be consistent

One of the most effective ways to build long-term wealth is to automate your investment contributions through pound-cost averaging: investing a fixed amount regularly, regardless of market conditions.

This approach smooths out fluctuations in share prices and helps build disciplined investing habits that pay off in the long run. It takes the emotion out of investing and may help you stay on track with your financial goals.

Another powerful strategy is to reinvest any dividends your investments generate. Instead of taking the payouts as cash, reinvesting them allows you to buy more shares and benefit from compounding returns. Over time, this can significantly accelerate your portfolio’s growth without requiring additional out-of-pocket investment.

Then there’s the question of monitoring your investments. Keeping an eye on how your portfolio is doing is important, but over-checking can lead to unnecessary stress and poor decision-making. You might want to review your strategy on a monthly basis at the same time your automated investment goes to work. In particular, assess whether your asset allocation still aligns with your goals and risk tolerance, and rebalance if necessary.

Common investing mistakes to avoid

It’s easy to make mistakes when you get started. It can pay to avoid:

• Chasing hype — jumping into high-risk bets like meme stocks or hype-driven trades might seem exciting, but they rarely pay off in the long run. Sustainable investing is about patience, not gambling
• Waiting for the perfect time — trying to time the market is a common trap. There’s no ideal moment to start. What matters is just getting started. The earlier you invest, the more time your money has to grow
• Ignoring fees — high fees can quietly eat away at your returns. Always check fund expense ratios, platform charges, and transaction costs. Opt for low-cost options whenever possible
• Delaying retirement investment — putting off retirement investing in your 20s may seem harmless, but it means you’ll need to save far more later. Starting early makes a huge difference thanks to compound growth
• Thinking you can’t start — even if you have limited spare funds, a small amount regularly invested is better than nothing, and you may be surprised how quickly your pot grows
• Misallocating ethical investments — many younger investors only want to invest in ethical or thematic funds that align with their values. This is completely valid, but it’s important to note that two funds with identical ESG ratings can deliver significantly different returns

Start investing in your 20s summed up

• Start early and build a strong foundation by creating an emergency fund, clearing high-interest debt and setting clear financial goals. Time and compounding work in your favour when you begin young
• Understand key investing concepts like risk vs reward, diversification and compounding. Use tax-efficient accounts such as a SIPP and a Stocks & Shares ISA to grow your wealth over the long term
• Begin with small, regular contributions and stay consistent. Low-cost index funds, ETFs, or our Smart Portfolio can be great starting points. Automate investments and reinvest dividends to maximise growth
• Avoid mistakes like chasing hype, timing the market, ignoring fees or postponing retirement investing