Answered by : Balaji Vishwanathan on Quora
The best place for a 20 year old to invest and save money is in his/her own skill sets. That has a far higher Return on Investment (RoI) than any other investment you could think of.
1. Get on to the habit of saving
It is an amazing habit to have. It doesn’t matter as much as where you save. Just try to lock away as big a sum as possible from each earnings. The habit matters more than the quantum of money you put in there.
2. Invest in learning & polishing yourself
If you find a really good book that can enhance your career prospects buy it. If there is a good course that can teach you a specific skill set, enroll. Constantly be on the look out for opportunities for learning- from traditional sources like books & non-traditional sources like people & experimentation.
There is an interesting quote from a billionaire that I recently read. “If I were to start all over again, I would just buy an expensive suit and start hanging out at parties where people with power & influence go to”. You don’t need to go to parties always, but find your way to network & learn.
3. Invest in traveling
There is no time as great for traveling than when you are young with no major responsibilities to the world. Avoid the cliched and over-touristed places and start traveling seeking to understand people and cultures. Travel can broaden your horizons that will indirectly improve your future earnings.
4. Investment in experimentation
Do have an idea of a business? Start it in a simple way. There is no other time on history where starting a company was a simple as now. Do you have an hunch that doing X will result in Y? Follow those hunches. See your life as a big set of experiments where you constantly setup tests based on hypothesis and validate them. Keep observing and keep improving.
5. Invest in people
The time you make most of your friends is before you reach 30. Attend weddings, help your friends achieve their dreams and see if you can improve their lives in however simple ways possible. Maybe you can pay for their travel to that interview they desperately need to go to. Or you can provide as simple as a file organizer before their interview. Care about people and make lasting bonds at this age.
Once you start earning a steady income through a full time job, then start investing in stocks and bonds. For that, start from this book: