The Lazy Way To Invest in Your 20s—and Still Build Wealth

You’re juggling rent, a social life, and rising up in your career, and you’ve got enough to worry about without considering retirement in 40 years. The good news is you don’t have to be an expert to build up the nest egg you’ll need if you want to have a down payment on a house or kick-start long-term wealth-building.

Even better news: The lazy way to build wealth happens to also be what’s led to some of the biggest gains for people over time. The trick is to automate small, regular deposits into low-cost index funds and let the money build up over time. By making a little effort and keeping your fees low, you can start today and allow your savings to snowball into real money tomorrow.

Key Takeaways

The “lazy” way to invest is also one of the most successful, often offering better returns than if you tried to pick stocks and time your investment perfectly.
You can automate regular deposits into low-cost index funds and target-date funds and use a robo-advisor.
Most active funds lag their benchmarks over time after fees, making passive strategies a sensible default for beginners.

What Is Passive Investing?

Passive investing involves buying a large, diversified slice of the market, or even the entire market, typically through an index exchange-traded fund (ETF) and then largely leaving it alone. Many people automatically contribute to their investment account with each paycheck, so your only job will be to check on it once in a while, as the mathematics of compounding does the work of growing your money.

You win at passive investing by keeping fees, trading, and taxes low because index funds simply track a benchmark rather than trying to outsmart it. History shows that most active managers fail to beat these index funds anyway.

Target-date funds, which automatically change what's in your portfolio to match your life stage, and robo-advisors leave you to expend even less effort investing.

Tip

High fees and frequent trading can quietly drain your returns over time, so choosing low-cost, diversified funds often leads to bigger gains in the end.

Active vs. Passive Investing

When choosing investments, you’ll encounter two main types of funds: Those that aim to outperform the market (actively managed funds) and those that seek to match it (passively managed funds).

Let's compare them:

Active Investing

Try to beat the market through stock picking and timing
Fund managers make frequent trades based on research and hunches
Higher fees (often 0.5% to 2% annually) to pay for research and trading
Require you to research fund managers, monitor their performance, and potentially switch funds
Results vary wildly—some beat the market, but most don't, especially after accounting for fees
Ability to avoid market mayhem, raise cash, or shift investments
Strategy can change with the manager; less predictable
The average investor uses these types of funds sparingly

Passive Investing

Shares give you ownership in a many different assets, like the 500 biggest American companies in the S&P 500 index
Rules-based, minimal trading needed
Low expense ratios (the fees you'll pay) and typically works out better for your taxes
Set it and forget it with a periodic check that the mix of funds you have matches what you want as the market shifts
If the market is up or down, the value of your shares, minus the small fee, are up or down
Ideal for automating your investing and letting compounding do much of the work
Clear method, predictable times to rebalance your holdings

Types of Passive Investing Strategies

As you can see, you don't need a professional terminal and three computer monitors to start building wealth. Below are some of the ways you can let your investments do the work while you go out and live your life.

Robo-advisors: Answer a questionnaire, link your bank account, and an algorithm builds and maintains a diversified portfolio for you, often with lower fees and minimums than traditional advisors.
Target date funds: Pick the year closest to when you'll start needing the funds, put money in regularly, and the fund automatically shifts from mostly stocks to a mix with more bonds later using a preset "glide path." These funds are designed to diversify and rebalance over time—there's a reason they're a very popular type of investment.
Buy-and-hold index funds or ETFs: Broad market ETFs and index funds aim to track an index, such as the S&P 500 or the total market, at an ultralow cost. You get instant diversification among a bunch of different stocks, intraday flexibility, and almost no homework—just make your automatic contributions and let compounding do the work.

Your biggest advantage is having 40-plus years for your money to grow if it’s a retirement fund. Set up automatic transfers from your paycheck, check that the mix of your investments matches your needs every six months or so, and review your fees annually. While your future self will thank you, your current self can focus on literally anything else.

The Bottom Line

The laziest way to build wealth in your 20s is to automate regular deposits into low-cost, diversified index funds, whether on your own or through a robo-advisor, or put your money in a target-date fund that rebalances for you. Let time and compounding do the heavy lifting.