Retirement Savings by Generation

Millennial Investing: Everything You Need to Know to Get Rich

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Millennial investing is about taking advantage of time and your options

The millennial generation is facing money challenges and opportunities like no other before them. In this video, I’ll share a complete plan for millennial investing from stocks, bonds and real estate to some of the mistakes that will crush your dreams.

I’ll then reveal how much to invest to become a millionaire millennial by the time you reach 55.

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Are Millennials Ready to Start Investing?

More than half of our growing Bow-Tie Nation is in that 24 to 40 millennial age range and I love that we’re able to reach some of the younger viewers. You’ve got some amazing opportunities ahead of you and I know you hear it so much that maybe it doesn’t mean anything but I want to help you really create that future.

I found some research on the average retirement savings by generation and it’s really why I wanted to do this video. Baby Boomers aren’t sitting so great with just over $135,000 saved for retirement but it’s really my generation, the Xers that surprised me. Not sure what the hell happened here but thirty-grand is not a good place to be just a couple decades out from retirement.

Retirement Savings by Generation
Retirement Savings by Generation

So I wanted to catch all you millennials while there’s still time, take advantage of that time you have left and help you build up your nest egg.

For all my fellow Xers out there, don’t worry, I’m putting together an Emergency 911 video to show you how to invest if you’re just getting started so watch for that.

Today, we’ll cover a millennial investing strategy for stocks, bonds and real estate. Show you how to get both safety and higher returns by using all three. Then I’ll show you some investing strategies outside the stock market, some ways to get a little higher return. We’ll talk about the biggest mistakes millennials make with their investments and then I’ll give you a complete investing plan for a million-dollar portfolio by age 55.

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Basic Investments for Millennials

I want to start off with some basics on stocks, bonds and real estate; why you need all three and frankly a really surprising chart that proves the point.

One of the best lessons you can learn in investing, and not learn it too late, is the power of investing across the big three asset classes. Here I’m talking about stocks, bonds and real estate.

Asset classes are just broad groups of investments that react in similar ways to the economy. For example bonds are fixed cash flow investments that do great when interest rates fall or when the economy weakens but not so well when the economy is booming. Stocks on the other hand do well with a hot economy but can crash hard in a recession.

The power of investing in all three of these, and I’ll show you a simple way to do this next, is you get all the benefits while smoothing out the risks. The money you have in bonds and real estate protects you from a market crash. Your stocks provide that upside opportunity and the bonds produce cash flow to reinvest.

All you have to do is look at this chart. This shows the value of a portfolio completely invested in stocks, the blue line, over the 13 years from 2007. Sure, stocks are up nearly 180% over the period but that 49% loss in the recession broke a lot of investors. They panicked, sold out of stocks and never got to that rebound.

Benefit of Diversification in Stocks
Benefit of Diversification in Stocks

Now look at the other line. This is a portfolio with 55% of its money in stocks, 25% in bonds and 20% in real estate. Was it still down in the recession? You bet your ass but that 33% loss looks a hell of a lot better than 50%, doesn’t it? And for that added level of safety, you only would have given up 4% return over the entire 13 years.

And that chart doesn’t even show the benefit of rebalancing. That’s when you adjust your portfolio by selling what’s expensive and buying what’s cheap. For example, in the 2009 crash, you could have sold some of your bonds to buy stocks at bargain-basement prices and made an even higher return than the all-stock portfolio.

Now the best part is, you can get all your bonds and real estate investments just like you do stocks. Exchange traded funds, or ETFs, are investment funds managed to hold a group of assets like the Vanguard Long-Term Bond Fund, that’s ticker BLV, which holds over 2,300 individual bond investments. You can buy that fund on any stock investing platform and have those bonds help protect you from the worst in stocks.

I also have direct investments in real estate through Fundrise and rental property but you can get all you need from these easy exchange traded funds.

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How Much Should Millennials Have in Stocks?

Now the percentages of your money in each of these asset classes will change as you age. You’ll want a little more in stocks and real estate. So maybe those of you still in your 20s can start with upwards of 65% in stocks, 20% in real estate and 15% in bonds. As you invest through your 40s, that number might shift to 60% stocks, 20% in real estate and 20% in bonds. These are slow decade-long changes though so not something you have to worry about right now.

Now I want to show you a couple of investments outside the ordinary, investments with a little more risk but potentially a lot more return than what you’ll get in stocks.

The idea here is that because you’ve got more time to invest, your tolerance for risk is higher. You can invest in some of these higher-risk investments and even if it takes a while, they’ll produce those much higher returns.

The first one is something we’ve talked about on the channel a few times before, futures investing. Futures are investments you make on commodities like oil, gold and even currencies like investing in the US dollar against other currencies.

The reason why futures offer so much higher return than simple stock investing is because you usually use leverage of 20- or 30-times your money. For example, I was buying futures on oil in 2016 with about $10,000 in the account but was buying an investment worth $135,000 so about 13-times leverage on my money. That meant the price of oil only had to rise a few percent and I made over twenty grand over a few months.

Another high-risk, potentially high-return investment millennials might consider is Bitcoin or some of the other digital currencies. I’ve invested in bitcoin myself off and on since 2019 and have no doubt that we’ll see another Bitcoin bubble eventually where earlier investors can see some massive returns.

But it took years for Bitcoin to do much of anything and it could be years again before we see another opportunity so unless you know how to value the coins for that shorter-term trading idea, then this one’s best left for those with decades to spare.

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Biggest Mistakes Millennials Make Investing

Before we get to that investing plan for millennials, I want to cover two of the biggest money mistakes and how to avoid them.

And this first one might not seem like much of a mistake but believe me, when you’re looking back ten years, it’s going to seem like it wrecked your life.

I’m talking about just not getting started investing.

And I understand the problem. The average millennial graduating college has almost thirty-grand in student loan debt…and not much to save. Even if you don’t have that student loan debt holding you back, it’s still never easy squeezing savings out of a tight budget.

That’s why I recommend saving just $50 a month to start. If you’re not saving right now, just put aside $50 and open an investing account. Even if you’re still paying down debt, getting into that habit of investing something every month is going to mean all the difference.

Even if you’re never able to invest more, that $50 a month can grow to over $220,000 by the time you retire…so not too bad for just skipping one night out a month.

If you’re not sure how to get started, I’ve got a five-minute quick-start guide on opening an investing account. I’ll leave a link below but it’s super easy and will have you investing literally in minutes.

The second mistake, and I see this from new investors of any age, but they fail to prepare for emergency expenses.

What happens is you start investing, saving away everything you can spare after paying the bills. Then your twelve-year old Camry decides to blow up and cost you $2,500 for a new suspension.

Without an emergency fund, you have to sell some stocks and take it out of your account. And it’s not just taking the money out, which is bad enough, but that it kills your motivation to save. You see your portfolio value plunge and it feels like you’re getting nowhere so you just stop saving.

Pretty soon, you’re 60 and wondering if you’ll ever be able to retire.

Now this is something we’ll talk about in our investing plan next but it can be as easy as just having two thousand in a savings account or some other emergency fund.

An Investing Plan for Milennials

But let’s get to that investing plan and looking through the numbers, it can be surprisingly easy to become a millionaire by 55 if you just get started.

For example, starting at age 25, you only need to invest about $500 a month to reach that seven-figure payday by age 55. Wait until you’re 30 though and you’ll need to deposit $900 a month and starting at 35 means investing $1,400 a month.

Now I don’t want you to get discouraged if you can’t invest that much each month. Picking that random million-dollar goal and age 55 really doesn’t mean anything. Whether you get to that million-dollar portfolio later or get to an amount that means financial freedom to you, it’s all about getting started and following a plan.

So we’re going to start with setting up an emergency fund of $2,000 in savings. That should be enough to cover most unexpected expenses. Then figure out how much you can invest each month, even if it’s only $50 a month.

Remember, even if you’re still paying off debt, I want you to start investing. No matter what the rate is on your debt, get in the habit of putting that $50 into an investment account each month. Because the tragic fact is that a lot of people will never fully get out of debt but everyone, god willing, will get to a point where they can’t or don’t want to work anymore.

So even if you never get beyond that $50 each month, it can still grow and become a solid nest egg by 60 or 65…and you’ll be glad you did!

Next we’ll decide on how much you want in each of the three asset classes and those alternative investments. For most millennials, you’ll probably want between 60% to 70% in stocks with 20% in real estate and the rest in bonds.

If you’re planning to invest in some of those other investments like futures or Bitcoin, I would put no more than 10% of your total wealth here. These are extremely risky but can also produce huge returns so it really doesn’t take much of your money to juice your total return. If you go with 10% in these, maybe you take five percent out of stocks and five percent out of real estate but I’d leave the bond portion as is.

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Millennials have an amazing opportunity to start investing and grow their nest egg…but we say that about every generation at one point. Here I am, Gen X, and wishing I started investing earlier and stuck with it. There are millions of Baby Boomers wishing the same thing. Don't pass up that opportunity to get started NOW!

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