What is the best investment vehicle for a 20 year old?

I'm 20 years old and wondering what the best possible investment would be for me: a 401(k), mutual fund, or a Roth IRA?

Investing, Starting Out
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October 2016
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Great that you are thinking about this at your age!  With some discipline and good habits, you will be light years ahead of most of your peers.

First, I'll assume you have some savings or an emergency fund. This wouldn't be money that is invested but rather just parked in a bank account for example to handle an unexpected expense. Most agree that 3 to 6 months of expenses is a good amount and I agree with that.

If you have a 401(k) at work and the company offers a matching contribution, I suggest starting there.  If they don't offer a match and your income doesn't put you in a high tax bracket, then a Roth IRA can make sense as your money grows tax free.  In the 401(k), your money grows tax deferred and contributions that you make will lower your taxable income today.

The Roth does not lower your taxable income today but allows for tax free withdrawals at retirement.

Good luck.

October 2016
October 2016
October 2016
October 2016