Though you experience several fun firsts in your 20s — your first adult job, your first real paycheck — for many individuals, it can also be a decade of barely scraping by financially.
Sallie Krawcheck, a former Wall Street executive and founder and CEO of Ellevest, was no exception.
“I spent my 20s not having any money to invest,” she told Business Insider. “I was going to business school, it wasn’t an option for me.”
But once she started making a more substantial paycheck in her 30s, Krawcheck decided to put her money to work.
“I became a research analyst, so I started to invest in individual stocks,” she says. “I said, ‘Oh this analyst across the way thinks this stock is going to go up, I’m going to buy that one!’ I had some nice successes, but I always forgot to sell.”
Krawcheck’s a-ha moment came when she realised that her investment strategy required a considerable amount of time without providing requisite payoff.
“Pretty quickly in my 30s I said, ‘Diversified investment portfolio for me,'” she says. “Maybe I’ll have a little bit of money on the side to play with and have fun with, but I’m not going to think I’m any better at this than anyone else, even though I was a research analyst.”
Instead of trying to beat the market by picking individual stocks, a diversified portfolio minimizes risk by encompassing a broad range of investments, such as the exchange-traded funds that Krawcheck’s Ellevest uses.