How To Build Wealth In Your 20s (Realistically)

what's up Graham it's guys here so just over 4 years ago I made a video about seven daily habits that changed my life and don't worry if you haven't seen the video here's what those were creating short and long-term goals making a to-do list every day meditating regularly getting on a consistent sleep schedule exercising going to the gym five to six times a week don't procrastinate get something done the moment you think about it including hitting the like button and subscribing if you haven't done that already and finally be consistent with your routine every single day now even though I don't doubt that those daily habits would help people tremendously with their General well-being life and business I wanted to take a slightly different approach with this video and go over the best investing habits that'll absolutely change your life some of these I've learned from practice some through mistakes and some are just common sense that people flat out forget but real talk all of these are habits that are actually proven to work and nearly guaranteed to make you money unlike shorting Nvidia this advice is so far proven to be completely Timeless to the point where you could come back to this video 10 years from now and it's going to remain just as relevant as it is today so with that said let's begin the video and these are the six investing habits that have changed my life all right so first it's investing as soon as I could now I got to say from all of the general advice out there this could easily be the most impactful in terms of how much wealth you're able to build throughout your lifetime because even though it might sound super basic to some people the reality is that most will never follow it they'll continue to deprioritize investing and focus on other expenses instead or more commonly is that they'll just think that they have their entire lives ahead of them to invest so what difference would it make to wait another few weeks months or Years anyway well fine I'm not going to lie waiting a few extra weeks or months is probably not going to be that big of a deal in the long term but I will say the type of person to continually put things off and postpone things is probably the same type of person who never actually gets around to doing something until eventually it's too late and here's the thing when you're young one of the biggest advantages that you have on a when it comes to investing is really simple it's just time not only are you able to write out any short-term fluctuations in the market but you could also take full advantage of what's called compound interest this means that the money you invest continues to grow at a faster and faster rate because that money makes you more money which then makes you even more money which makes you more money until pretty soon you have a billion quadrillion gazillion dollars that's why now you have a choice to make you could either use this information to make you money or you could ignore it and only time is going to tell how much that'll cost you the choice is yours but just consider this if you invest $100 a month starting at the age of 20 at an average of an 8% return by the time you're 65 that $100 a month will have turned into a nest egg of almost $540,000 however if instead you think but G I have my entire life ahead of me I want to go to Coachella and buy their avocado toast and you start investing that very same $10000 a month just 5 years later at the the age of 25 by the time you're 65 that amount will have only turned into $361,000 that works out to be a difference of $177,000 just by waiting an extra 5 years to invest early on and what's even crazier is that during those first 5 years you've only invested a total of $66,000 this is why the money you save and invest right now is pretty much going to be the most important money you will ever have in your entire life this also applies to times like right now when the market trading near an all-time high in fact JP Morgan looked at the average returns of the S&P 500 dating all the way back to 1970 and they found that if you invested in the S&P 500 at alltime highs your investment would have been higher a year later 70% of the time with an average return of 9.4% versus the 9% on average when investing at any time a wealth of Common Sense blog also seconds this finding that all-time Highs are usually followed by more all-time highs since the 1950s as he said if you invested in the S&P 500 in any given day since 1988 your average total return a year later would have been just shy of 12% however if you only invested on days where the S&P 500 closed at an all-time high your average total return would have been nearly 15% that's not to say that you should be dumping all of your money in the markets because the future is always going to be uncertain but it is to say that you shouldn't let headlines get in the way of your investing as early as possible even for me throughout my early 20 I was just in overdrive investing mode because I realized the significance of compound interest and I thought to myself that I would never have a better opportunity to invest than right now like I just saw every $1 I had at the age of 20 as being worth $21 by the age of 65 so if there was something I would want to buy I would multiply that price by 21 and then I think to myself is that worth that much money in future dollars to go and get this thing and most of the time it wasn't worth it and I would rather just invest instead next my second most important investing habit was not trying to time the market this one is probably the simplest most factual pieces of advice you will ever hear when it comes to investing but it's also the most difficult to follow that's because pretty much every investor out there thinks that they're smarter than everyone else that this time is different they'll read up on all the signs and charts that indicate future price action and then they believe that they could outperform every other professional investor by timing their Investments but unless you get absolutely lucky or you work for congress you're probably not going to make a lot of money doing this or you're going to lose don't just take my word for it either here are the facts to back this up since 2003 had you just bought and held your annualized return would have been about 99.8% but had you been trying to time the market and Miss just the top 10 best trading days over that time frame your annual return would drop all the way down to 5.6% and all it takes is to miss the top 30 best trading days over 20 years and all all of a sudden your return drops to just 8% or basically below the rate of inflation there's also another study out there that shows that generally speaking the more trades you make and the more you try to time the market the lower your overall return becomes this is why it's proven that the average investor is absolutely horrible when it comes to investing and they dramatically underperform the market so in terms of what you could do about all of this it's very simple all the research out there has shown that since 1926 a 20-year holding period has never once produced a negative result or basically if you just stay the course and do absolutely nothing like dead people you'll probably be just fine in fact just buying into the market immediately regardless of where it's trading has outperformed trying to time the market 71% of the time so that's why from my perspective your goal should be to invest as much money as possible and keep it there for as long as possible than trying to find the lowest entry point or selling at the peak and then trying to buy and lower because your chances of getting that right consistently ly are pretty much non-existent third you need to get in the habit of only investing in things that you understand now I know this is another one where people are going to say this is super obvious stop telling us stuff that we already know we already get this but yeah apparently it's not common sense because people ignore it and they do it all the time they invest in something because someone told them it was a good idea they see the price going up and they want to buy in before they miss out or they follow someone who appears to know more than they do well I shouldn't have to say this but uh yeah don't do that in this circumstance it's probably better that you don't invest at all than invest and put your money in something you don't fully understand of course I'm not saying that you have to be a full-fledged expert on the US equities Market before going and buying an index fund but you should at least know exactly what you're buying into how the investment makes you money how long you have to realistically hold on to it to turn a profit and how much volatility you could realistically expect to handle if you're not able to answer those specific questions and then explain why your money is best suited for that use then my recommendation is probably don't invest until you learn more even if that means you miss out on some potential profits just trust me in the long term you'll end up saving a lot more money in opportunity costs than you will by following random things that you don't know much about fourth the next investing habit that works really well is by not investing money that you need in the short term like here's the thing anytime you invest there's always a chance of it losing value in the short term that's also code word for me saying that every single time I buy an individual stock it falls the moment after I buy it this is why investing should always be seen as a long-term strategy for the most part you cannot predict where stocks are going to be trading at a week a month or even a few years from now but once you zoom out you could see that over a period of 10 to 20 years your chances of coming out ahead profitable or pretty good so for that reason investing any money that you need in the short term is probably not a good idea because there's a lot of risk involved just take a look at what happened back in March of 2020 there were so many Investments that dropped 50% % or more in a matter of a month had you invested all of your savings in January that you then needed to use in March or April chances are you'd be screwed and be forced to sell at a loss however on the other hand if you invested money that you knew you didn't need for the next 10 years well now those Investments would be up almost 200% without you doing a single thing other than holding so when it comes to this here's what I personally do if I know I need the money in the next one to three years for something like a down payment or paying taxes or another use I won't invest the money instead I'll just throw it into a savings account money market fund or treasury earning about 5% and I'll keep it there sure I could miss out on potential gains in the market but it also guarantees that I'm not going to lose money and then I'm going to have everything available by the time I actually need it and for me that peace of mind goes a very very long way in terms of thinking concisely and never having to panic sell if I don't absolutely need to fifth anytime it comes to investing get in the habit of investing consistently for me straight up investing is just a way of life it's not something that I dabble with here and there it's not something that I do when I only feel like it and it's not like a hobby I'll get bored with after a few weeks investing is really meant to be as consistent of a habit as brushing your teeth twice a day or think of it like going to the gym once you get in a routine of investing consistently it just sticks after a while and then eventually it becomes second nature like you do it without even thinking about it the truth is it's this mentality that's going to allow you to turn small amounts of money which might seem inconsequential today into large wealth later in life even just $100 a week chances are there's some things that you would be able to cut back on or downgrade just to be able to save this and let me give you an example if you literally did nothing besides invest $100 a week preferably in a Roth IRA so it's taxfree at an average of an 8% return you're going to have over $2.3 million saved in 45 years even if you don't have the $100 let's just say you have $50 a week in that case you would still have 1 Point $2 million during that time frame and the best part about this is that it's really as simple as automating investing as much as you can for instance you could set up automatic withdrawals to go and buy an index fund on a regular basis and once you set it up you'll never have to think of it ever again it's out of sight out of mind oh and also if you want to get started doing something like this I've got an affiliate link Down Below in the description where you could get some free stocks worth all the way up to a few thousand I do get a commission when you sign up but you also get some free stocks in the process so if you're going to do that you may as well get some free stocks so enjoy anyway when you're investing just plan for it to become a part of who you are and make sure you do it consistently on a regular basis it doesn't need to take a lot of time but once you automate the process it does become incredibly easy and finally six when it comes to investing get in the habit of thinking independently this one I admit is probably the hardest to do from everything that we've talked about but it's also going to be the one that will make you the most amount of money if you're good at it and what I mean by this is that you have to trust your instincts and research SE Arch and not be swayed by someone else who says otherwise or disagrees with you now I'm not saying that you should automatically tune everybody out or not listen to anything because that's stupid I'm also not saying that you shouldn't listen to any criticism or someone else's perspective but you should find a healthy balance between analyzing all the information that's out there and coming to your own conclusion honestly doing this has helped me make some of my best investments ever like buying real estate I was told so many times that I was making a mistake that I should wait a little bit longer and that prices were going to go even lower and this was back in 2011 and 2012 thankfully though I didn't listen I believed in my own research I understood the investment and I wasn't trying to time the market then we have another example with Tesla stock I started buying it at an adjusted price of about $18 a share but as soon as I bought it it dropped in fact I don't think there was a single day I was in profit until it fell all the way down to like $12 a share but I didn't worry about a thing despite every headline saying it was a worthless overhyped company it was the most shorted stock on the market and it was going to zero for me I just believed in the product long term I really like driving a Tesla I invested money that I didn't need and I understood the risks sure enough the stock turned around over time I began selling off my positions and then eventually I used some of that stock to buy an original Tesla Roadster now certainly this is not the case with every single investment because I've also made Investments that have lost money but I will say that by thinking for yourself not being swayed by others opinions and doing your own research you'll greatly outperform just following the herd so it's really from these six habits that I formed my entire investing career in fact I can't think of a single investment that I've made without taking all of these into consideration and like I mentioned earlier everything here is meant to last you for life this isn't just how to invest today or how to invest in 2024 instead this is something that you could take with you forever it's something that you should save and come back to from time to time anytime you're thinking of investing in something or buying into something you don't fully understand just research as much as you can take everything into consideration here's many different perspectives as possible and no matter what hit the like button subscribe and get some free stocks if you haven't done that already so with that said you guys thank you so much also feel free to add me on Instagram and don't forget that I also got a newsletter where I post every single week Deep dive topics just like this so if you're interested in following along it's totally free and you get topics like this delivered in your email in more detail than I'm able to include in YouTube videos so thank you guys so much and until next time

Channel: Graham Stephan

Views: 244,511

Keywords: investing, investing for beginners, investing in your 20s, how to invest, how to invest in real estate, how to invest in stocks, stock market investing, stock market investing for beginners, stock options, robinhood, robinhood app, best stock trading app, how to be a millionaire, how to be a millionaire in 3 years, credit score, credit score explained, credit card, credit cards for beginners, passive income, how to build wealth, how to build wealth in your 20s, real estate 101

Id: F1cghFu9zBs

Length: 14min 34sec (874 seconds)

Published: Wed Feb 28 2024