How should a 24-year-old with $100,000 invest?
I am a 24 year old single person with $100,000 to invest. I earn $35,000 per year and can save $200 per month. I have an IRA with $2,000 and will make a $1,000 contribution this year.
Exchange Traded Funds (ETFs) are a great way to diversify risk while seeking long-term growth. Allocating your funds in a portfolio with a smart variety of ETFs can give you proper exposure to multiple types of investment goals. Contributing to a Roth IRA can be a smart way to avoid tax payments later, and investing the rest in an individual taxable account can give you flexibility for shorter-term goals.
1. Be and stay disciplined every month
2. Be diversified in your investments
Pay yourself first every month and max out your contributions.
Ask good questions and work with someone who can put your interests before their own and avoid up front sales charges. Keep the relationship with an adviser representative long term like a doctor and patient so you both get you to your goals. Hope this encourages you. You can do it!
Over the long term, ownership of companies (stocks) creates the greatest wealth.
More wealth than bonds, real estate, gold and silver, or bitcoins.
Of the major areas of the stock market the greatest wealth has been created in the technology area.
Over the past 5, 10, and even 30 years the technology sector has outperformed all other areas.
Seven of the ten wealthiest persons in America earned their wealth in technology. Seventy percent.
Technology is where wealth is created.
When seeking investment advice insist on the fiduciary standard of care. Require that your advisor provide you with a written statement of their fiduciary commitment to place your interests first.
Seeing as how you are a few decades away from retirement, investing a large portion of that $100,000 in a stock index ETF isn't a bad idea. You'll have plenty of time to make up any losses incurred during subsequent bear markets and recessions. I would diversify among three ETFs. A US stock index ETF, an international, ex-US, stock index ETF, and a total bond index ETF (I'd stick with a short-term bond ETF).
How much $ you put in each ETF will be up to your comfort level. If you are okay with large ups and downs, but better odds of above-average returns, you'd probably be alright putting 80%-90% of your money in the two stock index ETFs.
I did have a question about how you obtained the $100k and what your employment situation is like. This can dictate what vehicle you are able to use when you invest this money. For example, you can only contribute to Traditional and Roth IRAs with earned income (wages, salaries, tips, bonuses, military compensation, professional fees, and alimony). Additionally, self-employed individuals have other (better) options in terms of vehicles available to them for saving for retirement.
I hope this helps!
It’s great that you’re already saving for retirement – you are already further along than many of your peers and stand to benefit greatly from compounding interest over the next 40+ years.
First, you didn’t mention savings outside of your IRA and it’s important to have enough cash on hand to cover any emergencies. Start by saving enough cash to cover 3-6 months of living expenses. This will help keep you financially “safe” in the unfortunate event of a true emergency or job loss.
After establishing your emergency fund, your next step should be to max out any tax-sheltered retirement plans offered by your employer to maximize the match (if you receive one.) Once you’ve maxed out your company sponsored plan, you may consider contributing to an IRA or Roth IRA. Note, there are restrictions around both tied to income and deductibility of the contributions which you should speak with a tax professional regarding if you are fully maxed out on your company plan and wondering where else to save. Taking advantage of the available options and their respective matches is the best way to save for retirement and benefit from compounding interest.
Ultimately, your risk appetite will determine which investment vehicle makes the most sense for your situation. Since you have a way to go before retirement, you’ll need to strike a balance between growth and risk management to ensure you have a strategy that meets your goals and keeps you comfortable over time. Meeting with a fiduciary financial advisor can help you determine how much growth you might need to achieve given your low risk tolerance.