Disclaimer: I am NOT a financial advisor nor do I have any professional experience in finance. All information is my opinion from reading, watching, and learning about investing in my free time.
As long as I can remember I’ve had bonds. My Pop-pop (grandfather) started them for me when I was born and I haven’t touched them since. I’m sad to say I actually have no clue what kind of bonds they are or how to get my hands on them even if I wanted to.
Naturally, this got me thinking about the safe and not-so-safe investments to make in your 20s because, well, I’m not getting any younger. I’ve talked to both wealthy and poverty-stricken people and they’ve all said the same thing: start saving as early as you can.
So, when I hit 25, I set out to learn as much as possible so I could be a millionaire by the time I was 30. (I’m still working on that goal by the way, but I’m not 30 yet either so there’s time!)
Investing 101
After reading Tony Robbins’ book, Money Master the Game, I’ve become somewhat knowledgeable about investing in terms of what you want and what to avoid. So, as a new investor in your 20s, you want to save as much of your paychecks as possible. (I save 20% + any bonuses or money I make from my blog, eBay, etc.)
You also want to have a “diversified portfolio”, which just ensures you’re well-covered when something bad happens to the “market”, like the 2008 crash.
Think of investing like branding. You want to have a presence (your investments) across all social media platforms (diversified portfolio) in case something happens to one (stock market crash) so you’ll have other platforms to share your message on (your investments will still hold value in bonds, REITs, etc.).
Bottom line: don’t put all your eggs in one basket.
You diversify a portfolio by balancing your risk/reward. A standard rule of thumb is the younger you are, the higher your risk can be, (Tony recommends a 70%-30% balance). A risky investment would be anything in the stock market, like Snapchat stock, for example. Snapchat’s doing so great now, but what happen in 3 months? No one knows, which is why it’s a risk.
You can balance your investment in Snapchat stock with safer investments like long-term, low-risk bonds or TIPS (Treasury inflation-protected securities).
Safe investments
- Treasury Securities - Treasury notes, bills, and bonds are good as gold as long as there’s a government.
- CDs - A savings certificate that allows the holder to receive a fixed interest rate.
- Fixed Income Mutual Funds (aka Bond Funds) - A collection of bonds held within a portfolio that mature on a staggered basis.
Not-so-safe investments
- Stocks - The stock market is never guaranteed.
- Actively Managed Mutual Funds - No one can outperform or predict the financial market.
- 401Ks – It’s not that 401ks aren’t safe, but they’re not necessarily the smartest investment unless your employer matches your contribution.
- TDFs – Target date funds estimate when you will retire and make investments according to that timeline, TDF’s have a “longevity risk” which means you could outlive your retirement money.
How to save more $$ in less time
- Spend less (skip the lunch dates, manicures, and unnecessary shopping)
- Increase your savings % (you should save between 10-20% each paycheck)
- Relocate to a state with no income tax (Florida, Texas, Nevada, Alaska, Wyoming, South Dakota, Washington)
- Save and/or invest every bonus you get
- If you get a raise, save the difference of what you were making to your new salary
- Have your company direct deposit a certain percent of your check into your retirement fund so you won’t see it and can’t touch it
- Balance your portfolio annually with a fiduciary not a broker (your investment fees should be 1.25% or less)
Key Takeaways:
- Save as much as you possibly can, diversify your investments, and take advantage of Roth IRAs.
- The longer time you have to invest, the riskier your investments can be and that means the younger you are, the riskier you can get.
- Also, read Money Master the Game (read all these books too).
What kind of financial plan do you have in place? We’d love to know your thoughts!
xx Britt
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