I know their are so many different pieces of advice so I plan to take each with a grain of salt so this question is not meant for the people who will say "don't listen to a forum for Investing advice".... I get it... I'm simply curious to hear thoughts...

I'm 21 years old and just graduated... have a good job... no debt, just married and a side business... after taxes and monthly expenses I have $3,000 per month to invest... I'm curious as to some Old Ags advice on asset allocation, investment vehicles and stratefies, and any tax advantages strategies for investing over the long term... please and thank you!

TheAggieInventor said:

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I know their are so many different pieces of advice so I plan to take each with a grain of salt so this question is not meant for the people who will say "don't listen to a forum for Investing advice".... I get it... I'm simply curious to hear thoughts...

I'm 21 years old and just graduated... have a good job... no debt, just married and a side business... after taxes and monthly expenses I have $3,000 per month to invest... I'm curious as to some Old Ags advice on asset allocation, investment vehicles and stratefies, and any tax advantages strategies for investing over the long term... please and thank you!

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You are already way ahead of most people 30 years older than yourself! As far as investment advice for someone your age in that sound of financial position, perhaps investing in your side business is best if it is something you can grow.

What sort of 401K benefit does your employer provide, if any?

My general strategy is:
1. Fund 401K to maximize company match
2. Fund Roth IRA
3. Fund brokerage account

In terms of asset allocation, I think young people should go heavy (>90%) on equities. I would suggest low-cost, no-load, commission-free index funds or ETF like Vanguard, Fidelity, or Charles Schwab products. I would avoid stock picking.

If you really can invest $3,000 per month, that opens lots of doors for other investments like real estate or further investing in your side business. Personally, I would take 1-2 years to build a nest egg, get some experience, and have some fun before going too deep in other investments. You've got nothing but time.

Invest in educating yourself by purchasing and reading these two books:

"One up on Wall Street" by Peter Lynch

And

"Fooled by Randomness" by Nasim Taleb


Probabaly also save up for a down payment on a house.

And if you are an inventor invest in good lawyers and accounts for your business and intellectual property.

Another good reading for intro investing is "If You Can." Best of all, it's free!

https://www.etf.com/docs/IfYouCan.pdf

I do think the suggested asset allocation of equal parts U.S. stock, international stock, and U.S. bond market is too conservative for young people. I personally choose to 75% total U.S. stock and 25% international stock.

Otherwise, there is lots of excellent advice on investing basics, controlling spending, tolerating risk, and so forth.

Agree with most everything posted here. Also another great resource is Bogleheads wiki and forums.

https://m.imgur.com/1rPEkGQ

Definitely save for a house. If you consider a 20% down payment and real estates average appreciation plus tax treatment it's hard to beat. We're talking 20-25% yearly.

After that, at your age, buy shares in amazon, nvidia, fanuc, softbank, and tencent

Ask your daddy for a million dollars

YIA

TennAg said:

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Definitely save for a house. If you consider a 20% down payment and real estates average appreciation plus tax treatment it's hard to beat. We're talking 20-25% yearly.

After that, at your age, buy shares in amazon, nvidia, fanuc, softbank, and tencent

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he said investing advice not lifestyle advice.

If you want to invest and invest. Invest. Invest. Live in the most tolerable but cheapest housing you can find.

If you think rent is throwing away your money go look up the interest payment on an 30 amortized mortgage . The first 15 years is primarily the interest portion of the loan.

You'll probably save the most money compared to your friends/peers by not chasing and dating women. I would hate to know how much I wasted* from ages 18-32.

* totally worth it though

1a. If you have a 401k, fund it to get the maximum company match. Keep an eye on expense ratios of the mutual funds available to you. High costs will eat up a significant amount of returns over your working life.
1b. Build an emergency fund. In your career you will learn that you are never indispensable to a company and can be turned out on your butt in an instant.

2a. If you have an HSA, fund it to the max. No other vehicle exists which is tax-free in and out. The money can also be used for medical expenses at any point in your life after you open the account.
2b. Fund a Roth IRA to the max if possible. Again, keep an eye on costs. I use Vanguard and keep some funds from T. Rowe Price from my early investing days which have performed well. Fidelity is another good low-cost option.

After this it's up to you/wife and your goals to determine where to save and invest. You could invest in dividend-focused mutual funds and stocks to generate more income, but this may not be important to you with your side business. Others on this board could suggest good reading materials. For now I do well to sift through financial bloggers' thoughts. I suggest:

http://rockstarfinance.com/

Stive said:

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I'd like you to show your math on a 20-25% return on buying a house with 20% down.

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-Buy 100k house for 20 down.
-100k house appreciates annually at 5%.
-20k "investment" makes 5k

pretty basic stuff

We could start with half of the "profits" being eaten up in taxes right off the top.

Stive said:

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While I appreciate the attempt I do believe you're missing a few key pieces of the equation.

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You're right. I left out tax and interest deductions as well as actual paydown of the note.

And taylor, everybody pays property tax. Anyway, op, do the math for yourself as part of your planning.

So you can't show your math. Noted.

TennAg said:

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Stive said:

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While I appreciate the attempt I do believe you're missing a few key pieces of the equation.

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You're right. I left out tax and interest deductions as well as actual paydown of the note.

And taylor, everybody pays property tax. Anyway, op, do the math for yourself as part of your planning.

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maintenance, repairs, regular cost of ownership...

TennAg said:

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Stive said:

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I'd like you to show your math on a 20-25% return on buying a house with 20% down.

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-Buy 100k house for 20 down.
-100k house appreciates annually at 5%.
-20k "investment" makes 5k

pretty basic stuff

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Monthly payment on a 30-year $80,000 loan at 4% is $384. That's $4584 per year. So you're "making" 5000-4584=$416/yr before taxes. 2% property taxes = $2000/yr, putting you at a $1584 loss. Pretty basic stuff.

Keep renting. Got it!

IrishTxAggie said:

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Keep renting. Got it!

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the answer to the question is very complex. The total cost of ownership is very different from just a down payment and monthly mortgage. If you can rent a cheap place or have several roommates it may make sense to continue renting. You may be able to save/invest more per month. If you are renting an expensive apartment by yourself then purchasing may make sense.

the answer is very individually specific.

But I can deduct the interest and taxes. That adds up to a 20% return right

/tennag

aunuwyn08 said:

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The real argument for purchasing a house is that every mortgage payment builds equity that can be tapped for future investments, while renting results in a complete loss of potential equity. Think of a mortgage payment as an enforced savings account on something you need anyways.

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the flaw in this argument is that to gain access to that equity you have to pay fees. There is a cost to borrow against or liquidate. If your total cost of ownership for the real estate was $500/month more than renting what is the real value of that equity?

There is no flaw to the argument I made because I did not specify what the equity percentage was. As long as the cost of tapping equity is less than 100% of the equity my point remains true.

aunuwyn08 said:

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There is no flaw to the argument I made because I did not specify what the equity percentage was. As long as the cost of tapping equity is less than 100% of the equity my point remains true.

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if you have a fixed rent of 1500 a month and you have a variable cost of homeownership that is 2500 a month on average. Is the $500 towards your mortgage each month plus the 20% down payment really that valuable versus the $1000 in cash flow?

Invest invest invest while you are young with no kids
Wish I didn't have student debt, that's what I would be doing. I'm 26.
Get a Roth IRA for sure and if your employer offers a 401K, do that if you haven't. I've got a traditional IRA from rolling over my previous employer 401K.
You'll wanna have several million when you retire.

Invest in what companies you know for the IRA. Example, I invested in MSFT when they got the new CEO around the $40s. I liked his vision and now they're at $84. They also have good dividends. Invest in companies with dividends. A safer route is ETFs which is multiple companies under one price and those give divys also.
Max out your Roth IRA per year. When young, you'll establish a foundation and then the divys will roll in. Never ever take from your IRA or 401K!

I would also suggest opening a Robinhood account to play around with stocks. Don't put all of your eggs in one basket but it's a good place to learn how the market works.

Another place is to play with crypto. Don't go crazy but it's good to have money spread into potential markets. You never know. Buddy of mine played with crypto and he just bought a Bentley. If I made that much I would re-invest it in Robinhood for more divy stocks.

And yea, save up for a house. The Texas housing market is crazy because it's cheap and there's jobs. Bunch of Californians and New York people moving over here.

Interesting thread. We have a young tenant with basically no family to talk to. He's a hard worker - very nice young man. He comes to us with questions about stuff every now & then and we are happy to help him when we can. His latest one is a doozy. He won big on a scratch off ticket. They kept a chuck for taxes, he decided on his own to pay off his school loans & car note. Those were worrying him to death so he's happy they are not hanging over his head anymore. He is left with about $30-35K which is a huge amount of money to him.

I don't feel comfortable advising him, other than maybe the basics. Like setting up an IRA. It's his first job in rural TX & he's not sure he wants to stay here so buying a house is probably not for him right now. He likes the idea of stocks but has never dabbled at all.

schwack schwack said:

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Interesting thread. We have a young tenant with basically no family to talk to. He's a hard worker - very nice young man. He comes to us with questions about stuff every now & then and we are happy to help him when we can. His latest one is a doozy. He won big on a scratch off ticket. They kept a chuck for taxes, he decided on his own to pay off his school loans & car note. Those were worrying him to death so he's happy they are not hanging over his head anymore. He is left with about $30-35K which is a huge amount of money to him.

I don't feel comfortable advising him, other than maybe the basics. Like setting up an IRA. It's his first job in rural TX & he's not sure he wants to stay here so buying a house is probably not for him right now. He likes the idea of stocks but has never dabbled at all.

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Well congrats to your tenant on that! I would only recommend he tell as few people as possible about the windfall. Extended family and 'old friends' come out of the woodwork when lottery money is brought up. I can't remember the study name, but most lottery winners have a sense of 'guilt' about not 'helping' family and friends. Usually the moochers say things like, 'you didn't earn the money, so share it.'