How To Invest In Your 40s and 50s

So, if you're in your 40s and 50s with more than $100,000 that you want to get started with investing, but you don't know how to start because you're a complete beginner, you don't know how to allocate your portfolio, and you don't know how to build a financial road map for yourself, then this is going to be the perfect video for you. I'm going to show you step by step on what you can do for yourself. So, by the end of this video, you're going to have 100% clarity. Now, I am currently 39 years old. So, I'm going to share with you exactly what I would do for myself. So, this isn't financial advice or anything like that. I'm just going to share with you what I would do for my portfolio if I were in this situation, too. And I'm going to share with you what a lot of our students in our community are also doing in this similar situation. So, the first thing I'm going to do is share my screen. And if you want to follow along with me with this video and you want to take a look at my study guides, everything is in my Google Drive in my $1 million road map down below if you're interested in downloading it. Okay, so step number one, we want to make sure that you hit the requirements before you start investing. So the two general requirements are you want to make sure that you pay off any highinterest debt. So, if you have any credit card bills, credit cards that charge you more than seven to 12%, it is mathematically strategic to pay this off first because you're going to get the highest ROI from this. The second is you want to make sure that you have an emergency fund built. Generally, it's around 3 to 6 months. So, at this age, you most likely have kids, you have a spouse, or maybe, you know, like for myself, I have I grew up in an Asian culture. we take care of our parents or maybe you have parents too that you want to take care of too then you want to make sure that you always have funds set aside so that they are it's high liquidity you can just take out money and you can just pay for anything in case something happens okay now there is a I would say if you have $100,000 this is kind of like the danger zone for you because you have this high amount just sitting in a regular checking or savings account that is not really earning any interest so the biggest danger danger for people like you is that your money is going to have inflation erode its buying power. So what do I mean by that? So the thing that you can do next is go to this website. So you can type in your own numbers. This is calculator.net. But if you were to type in $100,000 and say that the inflation rate is 3% which is generally between 2 to 3% per year. If you were to just keep your money in a regular savings or checking account like with Chase, Wells Fargo, Bank of America, that gives you only 01% interest, well, your purchasing power is going to shrink from $100,000 to around $55,000. So essentially, it loses around half of its value. Pretty crazy stuff, right? Because I know a lot of us, a lot of us millennials, we were taught at an early age that we needed to save our money. But we are now recognizing that if we were to do that, our buying power is actually decreasing over time. So what do we do with our money? Well, that's why we want to invest our money so it can grow for us into the future, right? If we take a look at my $1 million investing road map sheet, this is the Google sheet. You can go to 5A, tap 5A, where it says compound interest calculator. So, let's see where our money would be if we were to invest it instead. So, we'll say that our current balance, so we put in $100,000, and we'll say that the annual growth rate each year, so it's around 10%. This has been true for the S&P 500 over the last several several decades. Over the last couple of years, it has actually been a little bit higher around that 12% area, but we'll just say that it's 10%. And we'll keep it simple and say that the monthly contributions are zero. And we're going to invest this for the next 20 years, right? So, if you're 40 years old, you're not going to really touch your money. You just want to let it grow and just compound it over time for the next 20 years until you're 60, 65 years old. Cool. I'll type that in. Look at what your future balance will be. So instead of around $55,000, well, your future balance is around $732,000. Pretty crazy, right? So $632,000 of that is from the compound interest, the compound growth that you've gotten just by letting it sit into the stock market. So that's why investing is so important at this age, especially with the amount that you have. Okay. Now once you have the requirements hit, you kind of figure this out. Great. The second step is you want to figure out what is your fire, right? So if you take a look at my Google drive, there is chapter 15 where it says choose your fire. So what does fire mean? FIRE is an acronym of financial independence retire early. So you generally whenever you're investing the first thing you got to do is you want to see what is your target goal. What kind of lifestyle do you want to live when you get to 65, 70 years old, 60 years old, or if you want to retire earlier, maybe 55 years old, right? And once you have that goal amount, that lifestyle goal, then you can work backwards from there. Because the biggest problem that most people have is they start investing. They don't know what they're investing in and they don't know how much to invest in. So, they're just kind of randomly doing things. So, you want to get make sure that you get a clear picture of where it is that you're going down the road. All right? Hopefully, this makes sense. So there are generally seven types of fire. So there is if you scroll down there's lean fire where you live super frugally right now and you get to retire with a comfortable portfolio size. There is traditional fire. This is the one that you will most likely read about in the finance world on all of these articles. But this is the kind of like the standard where you want to grow your portfolio to a large amount where even if you were to take out money from your portfolio, your portfolio will continue to grow over time. So one way that you can think about this is an apple tree where you plant it in the backyard, it continues to grow and then it starts to bear fruit. And no matter how much you eat, how many apples you eat, the tree continues to grow and continues to produce a lot of fruit to the point where you can't even finish it all. Right? So, this is what traditional fire is, where you grow your portfolio to the size where you keep taking money out using the 4% rule, which I'll talk about in a little bit, but your portfolio continues to grow into the future. There's FatFire, Barista Fire. This one is a more popular one where a lot of people, they want to still work. they still want to contribute to their community by the time they are, you know, quote unquote retired or maybe work optional or they might want to work at a say coffee shop. I know for myself, I used to be a public school teacher, so I might most likely work with the community, work with the youth, teaching them about fitness and finance. Those are kind of like my two passionate areas in life. But yeah, you know, this could also be your fire too. Or you can even do your goal is geoire where you build a portfolio in the United States and then later move to another country. I might even do this myself because my parents are from Taiwan and I might even go to Taiwan to live a couple years there. I love the food there. A lot of my family members are there. So this is something that I would do. But you want to see what you want to do yourself. What kind of fire do you want to achieve? Now once you choose your fire the next step is you want to calculate approximate your expenses in the future. You know before you even talk about the future you want to see well what are your expenses now because a lot of people don't have clarity on how much money that they're spending on a monthto-month basis. So one way you can do this is you can go to the financial freedom road map down here this tab and you can type in say like your housing, food, transportation, whatever expense category into here and then just have a little bit of a ballpark of how much you're spending per month. Now if you want to get into the nitty-gritty detail, you can even go to tab 1A the budget sheet and just kind of put in these numbers here. Okay. Now once you figure out how much expenses you have, then you can figure out what your fire is going to be, right? How much money you want in your portfolio. So you can then go down here and click on this part, how much you need to retire. This is tab 5b. This is the rule of 25 or the 4% rule where you basically get your monthly expenses, multiply it by 12, right? because you want to see how much money that you spent per year and then you multiply that by 25. So this is based on the 4% rule where I just talked about traditional fire where your portfolio continues to grow over time and once you hit your goal target portfolio, you can withdraw 4% from your portfolio every year and your portfolio will still continue to grow. Okay? Now, of course, if you don't want to grow your portfolio to that much, you just want to, you know, once you get to a point where you have enough and you just want to take your money out and then just planning on just exhausting your portfolio for 20, 30 years, then you can also do that too. But some people, they want to leave money for their kids and their kids' kids and pass down generational wealth, right? So, you can take a look at this table here. I, you know, wrote down everything. So, this will show you how much you need invested in the stock market based on how much money that you want per month, like based on your expenses. Now, if you don't see your exact numbers here, right, most likely you won't. You can also type in your numbers here. So, let's say that you need $80,000 per year. So, that means that you need around $6,667 per month. That means that you'll need around $2 million in your portfolio if you want to hit traditional fire, letting your portfolio grow over time while you withdraw each year. Okay, so hopefully this makes sense here. Now, the next step is of course you want to start investing, right? That's what the majority of you are here for. How do you allocate your portfolio? So, I'm going to go to the sheet and I'm going to go to this part where it says portfolio allocation. This is 5 L. Okay. So, with this part here, if you have $100,000, because you are new to the stock market, like for me, I probably won't put all $100,000 into the stock market at once because I'd be kind of scared. I don't know what's going to happen, right? So my strategy and a lot of our student strategy in our community is we will do this thing called dollar cost averaging. We'll just kind of ease into the pool, right? We won't just jump into the pool. We'll maybe put a one foot in, see how we feel, put the other foot in, and maybe just kind of walk into the pool until we feel comfortable. So we're going to do the same exact thing. So instead of investing say $100,000, you can just put $10,000 in or whatever it is that you're comfortable with, right? So, you can put in $3,000 into a stable ETF, another maybe $3,000 into a growth ETF, and another $3,000 into an income or a dividend paying ETF. So, what are these ETFs? Well, generally for stable ETFs, they could be something that tracks the S&P 500 like, you know, SPYM, SPY, V, IVV, or if you want to invest into a mutual fund, FX AIX, you can do that too, right? This will track the top 500 companies in the United States. It has given around an average return of what around 10% a year. So you can even go to a website like Yahoo Finance and type in the ticker symbol SPYM like that. So this tracks the S&P 500, see what it is, see the performance of it over the last several years. So you can see that in the last 5 years or so, one share of SPYM was around $48. And where is it now? It's around 87 almost $90, right? It almost doubled, right? So this is the power of investing right here. Now, if you want to choose another stable ETF, you can even look into something like VT, a Vanguard Total World Stock Index Fund, right? You can see, click on the 5-year chart, see where it was before, which was around $103, $100. Where is it now? $155. Okay. Now, if you want to choose a growth ETF, similar to what I've said in my other videos, you are okay with a lot of volatility, but you want the higher potential for growth, then you can invest in something like QQQM, QQQ, VGT, VUG. I listed all of my favorite ETFs all right here, everyone. Okay? Cuz I know you're about to ask me. So, these tab 5F shows you all the S&P 500 funds. I personally invest in SPYM and SPY for cover calls. I'm going to talk about that in a future video. For 5G, it talks about all of the tech and growth funds. I personally invest in QQQM and 5H shows all of the high dividend paying ETFs, right? I personally invest in SCHD. But you basically, if you are someone with a higher risk tolerance and you don't mind the stock market just bouncing up and down, of course, you can invest in these high techch growth stocks or ETFs like QQQM. Now, take a look at this. over the last 5 years, right? You can see that one share of QQQM was around $139. Now it's around $295. You can see that over the last 5 years it has grown over $120 compared to something like VT that only grew 53%. Or if we take a look at SPYM, this only grew around say 79 80%. So I know you might be thinking, oh, I should just put everything into QQQM. Just be aware that whenever there's some sort of market pullback, it pulls back really, really quickly. So, you can see right here during the 2022 drop, one share was around $162 and it dropped all the way down to $107, $108. So, if you say, "Hey, I don't think I can stomach this," then maybe growth ETFs aren't for you. But if you are okay with the volatility, then you can invest in this. And of course the third category in this whole allocation here is with the highinccome high dividend paying ETFs which is like CHD. What are the other ones right here? Let me show you. SHD VM and SPYD. Again I am a investor in SCD. So if we take a look at the performance over the last 5 years it only had a 28 30% growth right but it has a higher dividend payout. Right? The dividend payout right now is around 3.29%. Meaning that for every $100 invested, you get $329. Compare this to something like a growth ETF where the dividend yield is only 0.46%. Meaning that you only get 46 cents per $100 invested. Right? So again, you want to see what your goals are and what it is that you're most comfortable investing in. But what I would do, okay, is I would go here, put maybe $3,000 into a stable ETF, 3,000 into growth, 3,000 into a income dividend paying ETF, and then just wait a month, okay? And just see where the stock market goes, see if I'm able to sleep at night. If I go, hey, you know, I like the stock market. I think it's okay. I feel more confident in it. Then of course, you can invest in a little bit more stable, a little bit more growth stocks. And as time passes, you're going to experience a pullback or some sort of correction where the stock market will drop, which is totally normal. And when that happens, I want you to track how you feel. Are you panicking? Are you not able to sleep at night? If you are, then maybe you might not be comfortable investing in these growth tech stocks where they're very, very volatile and you might want to put a little bit more into these income generating stocks, these income generating ETFs. Or maybe you can put a little bit more into these stable ones here. But if you go, hey, I actually don't mind the stock market dropping because I get to pick up shares for a cheaper price. Because if you take a look at history, every time there is some sort of market drop, what happens? We always move back up. It drops, we always move back up. So if you're not so emotional about it, then of course you can lean into more of these high volatile, high potential for growth ETFs like QQQM. All right? And you basically can just put in this money and every month see how you feel and you can just put in a little bit more into the ETFs that you feel most comfortable with. What a lot of our students do is they will put in $10,000 every month. So they'll put in $10,000 in January. Wait a little bit. See how the stock market reacts. $10,000 in February, $10,000 in March, $10,000 in April, so on and so forth until they invest the entire $100,000. Okay, I recently made a video on different options in portfolio allocations like this is more income focused where you see SCD is 50% of the portfolio. If you're someone who wants a little bit more growth, then you can invest more into QQQM, more of the growth. Or if you want something that's simple and chill, you can invest in something where you put everything all into a stable ETF like VT or VTI or VO. Or if you want to be more tactical like what we do with our students and they want to generate that short-term income because maybe they don't want to wait 15 or 20 years then pull out their money. Then you can do a little bit of both, right? You can have some shares into cover calls, cash accurate that monthly income. Again, I'm not going to talk about what this is. I'll make another video in the future uh because this is a beginner's video. But hopefully this video gives a little bit more insight on what you can do with your portfolio. And if you say, "Hey, Steve, I still need help with everything. Even with you explaining all of this, I still need a human being to tell me like what are some actionable steps that I can take right now because I'm afraid to pull the trigger." That's totally okay. Uh you can download my road map below and if you have more than $100,000, my landing page is going to take you to some sort of calendar. you can hop on a call with either me or my other team members and we'll give you some actionable steps on what you can do yourself. So yeah, so you feel a little bit more confident with investing and potentially we might invite you to our accelerator program for you to join our community. But either way, if you decide to join or not join, we'll still give you very clear actionable steps on what you can do. So this way you are more confident with investing. Anyway, if this video helped and you really enjoy this type of content, please give this video a like, maybe even subscribe to the channel. Let me know your questions down below because I'm going to be answering some of your questions in the next week or so. And yeah, you have a great day. Love you guys and I will see you in the next