The 5 Investment Tips I’d Give to My Younger Self

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If I could go back in time ten years, it would be easy to tell myself as a college senior to buy Bitcoin and dump it when it hits $69,000. I'd get instant billionaire status.

But that’s the easy way out. Let’s instead pretend that I have to impart general wisdom to help him invest more mindfully and effectively.

If he were right here, sitting across from my home office desk, wondering how I finally beat acne, what would I say to him (besides “Quit drinking soda!”)?

The Short Version

  • If I could go back in time and be my own financial advisor, I’d start by telling my twenty-something self to reframe retirement as the amazing investing opportunity it really is.
  • Next, I’d tell him to pour all other excess capital into index funds, maybe curate a YOLO fund for speculative investing, and not be afraid of a temporary loss.
  • Lastly, I’d tell him to take all investing advice with a grain of salt. Relying on a fiduciary is a sign of wisdom, not weakness.

1. Reframe How You Think About Retirement Saving

“Look, man,” I'd start by saying. “I know saving for retirement isn’t fun. It’s a tiresome obligation, like letting the dentist scrape your teeth every six months or going to a work-sponsored happy hour.”

But then I'd explain that saving for retirement isn’t putting away $1,000 now, so you’ll have $1,000 later. It’s putting away $1,000 now, so you’ll have $35,000 later.

Thanks to the power of compound interest, roughly every dollar you save in your 20s at 9% APY becomes $35+ in 40 years.

So retirement planning isn’t just dull, tedious saving — it’s giving your future self a big, Camry-sized bonus. It’s the easiest way to guarantee that you’ll be a millionaire…eventually.

Oh, and don’t forget to max out the employer match on your 401(k). Their 6% match may only be $3,000 in 2022, but it’ll be $100,000 in 2062.

Read more >>> 401(k) Investments: Should You Invest in a 401(k)?

2. Pour Excess Capital Into Index Funds

In reply, I'm sure my past self would say something like, “Look, future Chris — I get it — socking away a grand today means we’ll have an extra $35,000 by the time we’re a card-carrying member of AARP. But what if I want to feel rich in the meantime?”

If you want to achieve financial independence well before retirement, the answer is to invest in index funds.

Index funds track the performance of an overall index like the S&P 500, so it’s like investing in the stock market as a whole.

Now, why index funds? What makes them so unique compared to, say, Blue Chips? They’re low-risk, inherently diverse investments that provide steady, double-digit returns.

To illustrate, a $1,000 investment in the Vanguard 500 Index Fund ETF [VOO] in 2017 would be worth $1,533 at the time of writing — and that’s even though the markets are down (it would’ve been worth $1,955 in December 2021).

In short, liquidity and steady returns make index funds ideal for a mid-term portfolio (5 to 20 years).

Read more >>> How to Invest in Index Funds: Do It Right

3. It’s OK To Have a 5% “YOLO Fund.”

“OK, future Chris,” my younger self would say. “You sound really sensible, and I mean that in both a good way and a bad way. What about fun investments like GameStop stock and crypto?”

I would instruct my younger self to think of crypto and index funds as two different games in a casino:

Index funds are like a game where 99.97% of the time, you win 10% on top of whatever amount you bet. You could play this game and eventually get rich with almost no risk involved — just patience.

Crypto is like a game where you double your money 50% of the time. Sure, you might get a big windfall, but there’s no guarantee that you’ll get rich if you just play the game long enough.

Now, many people think that the rich got rich by playing the second game, being born into wealth, or working themselves to death.

While all those things can give you a leg up, the big secret to building wealth is decades of compounding interest.

All that being said, it’s OK to play game #2 occasionally. I dedicate 5% of my portfolio to a “YOLO fund” for speculative/mega-risk investments.

Sure, sometimes it outperforms the rest of my portfolio by 3x. But even still, I don’t invest a penny more than 5% because I know — through experience — that tomorrow it could lose half its value.

Read more >>> YOLO Stocks: What They Are, Benefits & Risks of Investing in Them

4. Don’t Be Afraid of a Temporary Loss

At this point, I think younger Chris would have questions: “Everything you’re saying makes sense, but I’m still a little nervous to start investing. What if I lose money? Wouldn’t it be safer to keep it in my bank account?”

I feel ya on this one. Every time I’m about to commit to an investment, I hear the voice of the investor from South Park.

Copyright: Paramount Global

Investing can be intimidating, so let me share two facts that spur me on:

Money isn’t “safe” sitting in your bank account. In fact, it’s losing value due to inflation. It’s actually safer being invested somewhere low-risk like an ETF, index fund, or — during periods of intense inflation — the massively underrated I Bond.

You haven’t lost money until you sell. If your diverse portfolio is down $1,371 today, it doesn’t mean you’ve lost $1,371. It just means now’s probably not a good time to sell. In fact, one of the best ways to survive a recession is just to hold on and weather the storm.

Read more >>> Inflation-Proof Investments: 6 Ways to Protect Your Portfolio in 2022

5. Be Careful About Who You Take Financial Advice From

There are a lot of folks out there who think that making money qualifies them to give advice. They mistake luck for skill, wealth for wisdom.

Your financial advisor is the only person truly qualified to give you financial advice. They have a fiduciary duty to you, meaning they’re legally and ethically bound to act in your best interests. It’s like the Hippocratic oath for financiers.

Now, I’m not saying you should cover your ears anytime you hear money advice on TikTok. Just take it with a grain of salt.

If you genuinely think a friend, influencer, or fellow trader is onto something:

  • Do your own research
  • Ensure it fits within your risk tolerance
  • Run it by your financial advisor

Think of money advice like medical advice; best to run it by your doctor first.

Read more >>> What Is a Financial Advisor?

The Bottom Line

As a 30-something, I’m well aware that my wisdom is limited. There’s only so much I can send backwards to my 20-something self.

This is why I can’t wait to hear what my 40-something self has to tell the both of us.

What nuggets of wisdom would you add? Let me know in the comments.

Further reading: 

Chris Butsch

Chris helps young people prosper - both mentally and financially. In addition to publishing personal finance advice for Investor Junkie and Money Under 30, Chris speaks on the topics of positive psychology and leadership through CAMPUSPEAK and sits on the advisory board of the Blockchain Chamber of Commerce.

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