
Ask HN: If you're 20 years old, how would you invest $100k? - oscilator
Say you were 20 and you had $100k tax-free in your bank account to do anything with.
What are some ways in which you&#x27;d invest it to get some yearly return?<p>Or, if you&#x27;d do something else with it, what would you do?<p>Thanks HN!
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patio11
Depends.

If you have high risk tolerance and won't need this money until retirement,
you should deposit it in your choice of Vanguard Total Market or Vanguard
Retirement 2050~2065, and forget about it for the next ~35~50 years.

If you anticipate needing to actually spend it within the next few years, or
you are risk adverse, you can put it in CDs, which will earn you virtually
nothing but let you withdraw it at any time. You'd probably want to do a CD
ladder, which would leave you with some money maturing in any given month, so
you could use it without penalties.

The $100k is also not your primary asset at this point in your life. That
would be the NPV of your nascent career. Depending on one's existing
trajectory, I'd strongly consider building capital in oneself as opposed to
investing it in the formal markets. For example, if one cannot program, $10k
invested in learning to program will probably absolutely destroy the ROI of
most investments in the public markets.

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dennisgorelik
Warren Buffett recommends investing into S&P 500 (instead of any managed
fund), but aside of that his recommendation is pretty much identical: forget
about it and focus on your primary job/business.

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stephenmm
Warren Buffet's advise is great but I have never understood why he picks S&P
500 vs the Nasdaq? If you look at almost any time period the Nasdaq has
outperformed the S&P by at least 1% (Annualized Growth Rate) which compounded
year after year is a significant difference over your working lifetime (~%50
greater return after 40 years)! This is what I have been doing for the past 10
years and I am >2% (AGR) over the S&P.

~~~
logn
Warren Buffet likes companies with strong revenues and profits, and
importantly, companies that pay shareholders/owners. Nasdaq Composite is
largely tech companies whose main value is growth potential and most of their
profits get reinvested in the business.

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ISL
I'd spend $100 of that on a few widely-accepted but contrasting books on
personal finance and investing. A library card will do just as well. Read them
carefully.

Price is what you pay, value is what you get.

A traditional option is to buy index funds over time.

Stay within your circle of competence. If you have to ask if something is
within your circle of competence, you already know the answer.

If you're in a low income tax bracket, making contributions to a Roth IRA can
be very wise in the long run.

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nicholas73
If it were me today, I'd play with it by algorithmic trading.

If it were me at 20, I'd tell myself to take 30k, buy a decent car and pick up
girls, and leave the rest to smooth over my life. Especially to avoid taking
jobs when I don't really want it just for money. Then I could invest in my
personal projects and skill growth.

Whatever investment growth for that 100k would have been really meaningless
compared to the experiences I missed out on.

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joeclark77
I'd buy land. The US has unknown dozens of trillions of dollars in debt that
we have no intention of, or plan for, ever paying back, and the dollar is due
for a major crash, if not right away, definitely sometime between now and when
you'll be at retirement age. I wouldn't trust any investment I couldn't hold
in my hands or stand on. Buy a few acres of good farmable land... live on it,
or rent it out if you want, but you'll be glad you have it to fall back on.

~~~
AnimalMuppet
Make sure you get water with it.

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logn
At 20 years old I think it's important to keep the cash liquid and safe.
There's so much that can change in your life that the money can come in handy
for, and there are so many ways that access to that money could change your
life.

That said, in the US, it's also a good opportunity to max out a Roth IRA every
year. There's a lot of upside to Roth IRAs and not too much downside: you can
deduct your contributions anytime without any penalty or taxes. And in
retirement years, the gains can be withdrawn tax free. In a Roth IRA you can
hold a wide variety of assets, real estate trusts, and metals.

But overall I'd just hold onto the money as money and treat it as a rainy-day
fund for the rest of your life.

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Kanbab
If you have the credit I'd buy $500,000 worth of rental properties. Ideally
I'd get 10 x $50,000 putting down $10,000 each. You'd need a bit extra for
closing costs, so you can just buy 9.

If done right, you should be earning over $15,000-$20,000 a year in rental net
income. Spend that money as freely as you'd like, making sure you keep aside
3-6 months of mortgage payments in cash.

Learn how credit works, and feel comfortable buying a car with little money
down at 1% interest, rather than reducing your asset value buy buying a car
with all cash.

You should read more about this but that's my suggestion, best of luck.

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mrfusion
Where would you find properties that cheap?

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opendais
I'm not the OP but even in middle america you can.

I'm not convinced on his returns tho.

I calculated renting out my condo, refinancing to buy a second one, with tax
depreciation, repairs, etc. I was looking at a return of ~2% on assets and
operated under the assumption housing appreciation would cover the cost of
inflation.

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JoachimSchipper
Depending on skills and inclination, pursuing the right degree at the right
university has an expected value very much in excess of $100k over what you
might otherwise do. E.g. if you want to be a lawyer and could use this money
to pay your way to $PRESTIGIOUS, instead of going to $PODUNK, consider that.
(Or, as patio11 says, if you'd otherwise not learn how to code, consider
_that_.)

(Be careful, though - American higher education can consume a lot of money and
leave you with very little value. Be doubly careful with law in particular.)

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pnathan
If I had no college degree, I would go to a state school and obtain a zero-
debt degree in computer science (maybe dual-major in math or stats) with it.
This is a good investment.

If I did have a college degree, I would get a job and stuff the money into an
automatic "growth" stock index and ignore it until time came that it became
needful. Possibly in a retirement fund, possibly in a house fund, possibly in
a "children's college" fund, depending on life priorities. For pure bang-for-
the-buck long-term, an IRA wins here.

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garethsprice
First, take a bit of it (5-10k) and blow it on the crap you always wanted.
Enjoy life. It's interesting how quickly you tire of buying expensive things.
Good to learn this lesson early.

Then:

Education - despite grumblings about rising cost and legends of the Silicon
Valley dropout billionaires, a degree still leads to earning an additional
$1m+ over your career and provides a good foundation. Getting an education and
leaving without debt will put you in a really strong position compared to your
peers, who will be weighed down with student loan debt for decades.

Housing - Depending on where you are, put 20% down on a 30-year fixed mortgage
on a modest but nice house (average for the area). If you move, you can rent
it out. The bulk of household wealth is in primary residences. This will put
you decades ahead of your peers, who due to student loan debt will be unlikely
to be able to purchase homes until well into their 30s.

Mutual funds - Mutual funds allow you to match growth in the stock market. You
are young so can put money into the aggressive funds which may even beat it,
but don't worry too much about beating the market, even pros have a poor track
record at that. Just put the rest into a mutual fund and forget about it. Read
about Compound Interest to find out why.

Thing is, 100k isn't a lot (even if it seems like it now) and you probably
don't have enough to do all of the above. But, it can create a great
foundation that will allow you to take great risks (starting companies,
speculating in real estate/stock market) if you want to, or a steady path to
continue down.

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galfarragem
Take a year and go see the world (20K will be more than enough to do it with
your age). Go test yourself and specially leave your comfort zone. Pick a
place in the world and go there. Live as a native. Don't be afraid, you have a
safety net and a safety net will boost your confidence dealing with any
possible problem. Live in the present for some time of your life, you'll never
forget that experience. Start to worry about future at 28-29. Focus after 30.
Start as early as possible (after/during college), not at 27 (when I managed
to have a safety net) because you will not be ready to focus at 30. You can
always call yourself a late bloomer but your level of anxiety will raise
exponentially. I wouldn't advise you to go in this way.

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seanccox
Say you're 20 and also healthy, with no commitment to a specific geography or
time constraints:

Budget a trip to a destination you want to visit, with one rule: no flights.
Then, slash the budget in half, invest/save the rest, and figure out how to
get to your destination and home again.

Take your time.

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mattm
Learn about the Permanent Portfolio -
[http://www.crawlingroad.com/blog/2013/08/12/permanent-
portfo...](http://www.crawlingroad.com/blog/2013/08/12/permanent-portfolio-
basics/)

It was created as very simple and easy to follow investment strategy by Harry
Browne who had many years experience in the financial industry. It is meant to
protect your wealth first and grow it with the market. No more, no less.

Also, Harry Browne's #1 rule of investing is:

Your career provides your wealth

Stick all (or at least most of it) in the Permanent Portfolio, forget about it
and focus on your work.

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RollAHardSix
If you don't think you'll move, buy a house outright. If you do, invest in a
Vanguard or similar 'safe' investment account (see a professional).

Depends on housing prices where you live I suppose, here 85k landed me a
quaint 1200 sq ft 3 bed / 1 bath place in suburbia. Not the best house, but
one I'd be ok dying in.

Honestly being young, talk with a professional and see where would be safe and
yet flexible if you need it later.

~~~
caw
OP might need to interview a few professionals, because I talked with a
retirement advisor (free via work) shortly after college and they basically
told me "You're young, you could lose all your money tomorrow and it won't
matter in the long run" and basically gave the normal advice of "buy index
funds."

Similarly trying to find someone now that I can pay for advice is difficult
because there's no one around working with young professionals. You either
need a few mil in assets, want them to manage all your money, or be 10-15
years from retirement.

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doomrobo
Why hasn't anyone suggested using some of that money to hire a financial
advisor? That option, while potentially costly, seems least likely to
backfire.

~~~
zwiteof
Probably because most financial advisers are thinly veiled salesmen
masquerading as financial experts. If you do want an adviser, you want to make
sure they have fiduciary duty, if not, you're just as likely to get dumped
into high load, high fee funds that just pad the pocket of your "adviser"

~~~
chrisBob
I went with a financial advisor because otherwise I know I would just leave
the money in a savings account, or even worse, spend it. Working with First
Command was what I needed at the time to get set up putting some money into an
IRA plus some other investments every month. If you want to dedicate the time,
and have the willpower to invest yourself I have no doubt you could do better,
but not everyone is in the perfect situation to do that.

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BillyParadise
Other things to consider... how much do you value that $100k? How long would
it take you to replace? If I had 100k at 20 and I had a good job or business
that let me put away 50k, then I'd go very agressive with it. Why? Because
it's relatively easy to get back to zero if all hell breaks loose.

If you were 50, and had that 100k, my answer would be completely different.

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adam419
If long term was your goal, put half in an IRA and have it managed by a mutual
fund with a good track record of around %10 a year. That would easily make you
a millionaire by 65.

~~~
massappeal
Agreed. Make it a Roth IRA and you're set.

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chauzer
Put it in a Betterment account and spend my time focusing on things are that
I'm better at than trying to actively invest.

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snoopybbt
I'm 22, and if I had $100K and lived in the US, i'd buy a house.

Get yourself a roof upon your head and start building a life.

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codemonkeymike
Buy a rental property such as a duplex in an up in coming neighborhood and
live in the landlords suite.

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jwheeler79
buy equal parts of IBM and John Deere. Come back in five years and watch your
money double.

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taf2
Save it until you get married and have a kid :)

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staunch
Buy a house, pay it off, rent it out.

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marincounty
Move to France and work on becoming a citizen.

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tsarzen
Vegas baby!

