If you have even spent just a small moment trying to think about your financial future, there is a good chance you’ve thought about the number you need to retire. Depending on your age, this number is going to vary, pretty significantly, but there is still a number people want to hit.
In the case of this Redditor posting in r/dividends, there is a desire to hit $400,000 in total investments by the age of 30. They are trying to draw a comparison between the savings of those in America and those outside the US, where the numbers can vary significantly.
Investing Until You Hit $300,000
On the one hand, there doesn’t seem to be any reason why this Redditor is focused on the $300,000 number, other than it’s just a goal they want to hit. The challenge is that they are scratching their head trying to figure out how someone inside the United States, putting away approximately $40,000 a year in investments and investing in ETFs like the Invesco QQQ Trust, Series 1 (NASDAQ:QQQ) or broadly in the S&P 500 is seeing enough of a return to hit this magic number.
Alternatively, it’s their experience that outside of the United States, they are seeing others invest in QQQ, the S&P 500 and some cryptocurrency investments, and only have around $30,000 in total investments. What’s more notable is that they are shocked to see that some 30-year-olds in the United States already have more than $400,000 invested. This leads directly to the question of how? Is it higher salaries, inheritance, family help, real estate, business income, or something else that is making this individual feel like Americans are getting ahead?
Ultimately, what the Redditor wants to know is how someone outside the US could reach a similar investment level, and how long it would realistically take them to do so.
Don’t Make These Comparisons
Look, the one thing I can safely say is that life isn’t fair, and some people have more of an advantage over others. Whether it’s because of a better salary or family help, there are always going to be those individuals who are in a better financial situation than you. This is as true as it is to say that the sun will rise and set tomorrow. The best advice I can give to this Redditor is that while their question is a good one in the hopes of finding a better strategy, trying to make actual and specific comparisons is a good way to just make yourself even more upset.
In this case, you have a Redditor who started off with a low(er) salary in their own words, so they are playing a bit of catch-up. Of course, it’s also a reminder that the average salary in the US isn’t much more than $60,000, so this Redditor is seeing a lot of people talking on Reddit about big salaries and savings strategies, but this isn’t average America, and this group is a microcosm of what is actually taking place in investment accounts all across the country.
The Best Strategy Is …
Since this Redditor is asking for advice, here’s what I would say beyond the idea that most 30-somethings don’t have that much money. However, the best strategy here is to simply make more money and then make some investments. If you wanted to invest $40,000 annually to reach $400,000 by the time you are 30 and had no worries about money, spreading this across a broad spectrum of ETFs is probably your best bet.
Dropping money into QQQ is a great place to start, but spreading the risk and returns across other ETFs like the Vanguard S&P 500 ETF (NYSEARCA:VOO), the Schwab US Dividend Equity ETF (NYSEARCA:SCHD) and the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is probably a great place to start (although you’ll have to take into account the considerable overlapping positions since these are broad index funds). Unless you want to focus on dividends, which can turn on you pretty quickly, diversifying your portfolio across ETFs, 401(k)s and IRAs is going to be the best bet.
Alternatively, you can add some real estate or real estate investment trusts (REITs) into the portfolio and see if you can improve your returns as well. REITs are well-reputed for offering dividends that pay sizable yields; however, as pass-through entities, be mindful of their tax treatment, which can erode your long-term gains.
The most important piece of advice I can give here is that you should be watching your portfolio regularly and making quarterly adjustments with or without a financial advisor to try and hit whatever your personal goal is.
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