I am going to start calling the 30s “the compression years” because you spend the entire decade being compressed financially.
In your 30s, you are trying to climb the corporate ladder, get married, have children, and buy a house while living the American dream.
It’s no wonder that most people have upside-down bank accounts after their 30s. I was in $77,000 in debt until age 38.
However, I would like to believe that if I had the information going into my 30s, I would have made better choices. This is the article I wish I had in 2011 when I turned 30.
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Bond investing in your 30s. Most advisors tell people to stay away from bonds and fixed income until their 60s and 70s. It’s true that growth is more important in your younger years, but that doesn’t mean bonds have no purpose.
Bonds are a way to protect our capital while generating a return. We don’t want to have all of our money in risk assets (stocks) and emergency funds (high-yield savings). Bonds are a happy medium between these two asset classes.
Like in our 20s, Series “I” Bonds are the top choice for our 30s. These financial instruments are fire and forget; plus, we can invest for our spouse and children.
30-year Treasury Bonds are also a good investment in our 30s, as long as interest rates are solid. My personal rule of thumb is to buy 30-year bonds yielding above 4%.
30-year Treasury bonds are a great addition to our portfolio because they generate income we can reinvest into higher-yielding income products.
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Let’s say we have $20,000 in 30-year bonds that yield 4.5%; that’s $900 per year we can use to invest in an income-investing portfolio while keeping the principle safe. I call this high-yield bond reinvestment.
Stock investing in your 30s. Everyone will tell you that “growth at all costs” is the way to invest in your 30s. Of course, I have a different view.
It would be amazing to have massive capital gains from Tesla (TSLA), Amazon (AMZN), and Nvidia (NVDA), but there is something you can use much more in your 30s—income!
When you get married, have a wedding, raise kids, and purchase a home, you are part of the “family economy.” Trust me; the family economy never rests.
Things can get very expensive very quickly. Just look at the cost of housing inflation over the last four years. Growth is an important element to all of our portfolios, but income is the number one thing we need on a day-to-day basis.
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How do we balance growth and income? You can look at the relationship in multiple ways, but ultimately, it comes down to your risk tolerance and preferences.
I like to have about 10% in growth stocks like Google (GOOG), Amazon (AMZN), and Facebook (META). I have another 10% in index funds (QQQ, DIA, SPY, VTI). From there, I have another 30% in dividend growth stocks like McDonald’s (MCD) and Procter & Gamble (PG).
Finally, I have the rest in high-yield income-investing assets like closed-end funds (PDI, ECC), preferred shares, and business development companies (ARCC, CSWC).
As someone who has lived through my 30s, here’s some advice: be easy on yourself. You cannot expect yourself to have a $100,000 portfolio in your 30s.
It would be an amazing goal, but many things are out of your hands. Some of these things are costs related to childcare, homeownership, marriage, education, and raising children. Plus, you still need to save toward your retirement via a 401 (k) or Roth IRA.
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Give yourself some grace in your 30s. Most importantly, do everything in your power to stay out of credit card and student loan debt. Just avoiding these two traps will pay off in spades.
Options trading in your 30s. Now, trading options in your 30s can be the financial catalyst you need to build wealth early in life. The main goal is to avoid becoming obsessed with trading options, as you will have little time for the markets.
It’s not difficult to become a part-time options trader, but here are my recommendations. Read at least 4-6 books on trading options, day trading, and swing trading.
Although these represent different professional trading techniques, some of the strategies overlap. So much of the options and stock market is about the “little guys” teaming up against the market makers. That’s why it’s vital you read as much as possible.
Selling covered calls and cash-secured puts may be too expensive in your 30s. You would need at least a $20,000 portfolio to generate any type of meaningful return.
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Instead, I would trade long strangles during earnings calls and other volatile moments. A $5,000 options portfolio could safely net you $500 monthly.
Earning $500 monthly from the comfort of your home would be an amazing feat. I wish I had known how to generate those types of returns when I was in my 30s.
Overall, trading options is about finding time to read and invest. Remember, you will need access to your accounts when the markets are open and you have “live” trades.
You don’t want to be in a board meeting when your calls or puts are winning, and you must sell them quickly. You can make many trades from your phone, but I still recommend a standard brokerage website.
The good thing about being a part-time trader is you shouldn’t need an options trading platform like Think or Swim. You also don’t need four monitors and to have the news cycle constantly playing in the background (joke).
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Everything overlaps. The most important financial decision in your 30s is making a conscious effort to stay out of debt. If you succeed, everything will fall into place.
If you are risk averse (don’t like taking risks), start with 30-year Treasury Bonds. You can also purchase 2-, 5-, or 7-year Treasury Notes, but I prefer long-term bonds (personal preference).
As you start to receive interest payments, invest them into high-yield products like closed-end funds. Once the CEFs pay you dividends, save them in an options portfolio.
It may take you ten years, but eventually, you will have $5,000 in your options portfolio. You will also still have your original principle inside of your 30-year bonds.
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Every financial decision you make overlaps with another. The goal of your 30s is to see these movements before they happen; that’s how you become a true investor.
Conclusion. An investor attempts to predict the future and makes a financial decision based on their predictions. It’s tough to see your financial future in your 30s because there’s so much going on; however, this is the time to learn.
You should be able to start the year on January 1st with $5,000 and say you want $6,000 by December 31st. That’s how an investor beats inflation and the cost-of-living increase.
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You should be able to achieve your $6,000 goal by using a combination of bonds, stocks, income products, and options trading.
Now, imagine you have $50,000 and want to have $60,000 by the end of the year; it’s the same process. However, you may need to purchase a business to achieve your goal, for example.
Becoming a great investor starts as soon as you take control of your financial destiny. Your 30s are the time to do so. From the outside, your 30s look like a mess because they are.
However, you can take control by reading and following markets. Take a $500 portfolio and make it your goal to be $600 by the end of the year. That’s how you become a great investor in your 30s. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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