Stocks, Bonds, & Options in Your 40s

Stocks, Bonds, & Options in Your 40s: Determine Your Reality

Welcome to your 40s, when you start to see the light at the end of the financial tunnel. Now is a great time for you to make some big bets while also playing it safe. Does that sound strange? Again, welcome to your 40s.

The essential part of getting your money right in your 40s is distinguishing between the life you have and the one you want. This is a code word for “stop dreaming,” at least a little.

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We can still have dreams, but our lives are closer to reality in our 40s. I am 43; I don’t dream of having a second military career because that’s not how it works. Instead, I focus on the life I created over the last 43 years.

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I see many 40-year-olds who still want to become entrepreneurs, open a business, go back to college, or get a new job. However, their finances don’t support these dreams. Let’s set the financial foundation of success.

Welcome back to the Stock, Bonds, & Options series (20s, 30s), where we build the life we want and then live it.

Bond Investing in Your 40s. Bonds will play a much larger role in our 40s because we have much more to lose. We have our families to protect, provide, and provision; we can’t have all of our money sitting on the stock market.

Of course, we will start Series “I” Bonds for everyone. Even if we only set aside $50/month for each of our family members, it still means a lot for their futures.

Additionally, Series “EE” Bonds will also play a powerful role in our 40s. If we run out of annual Series “I” Bond purchases (up to $10,000 per social security number), then we can turn to Series “EE” Bonds.

The US government promises to double Series “EE” Bonds in 20 years. I consider these investments as future cash flow for our children.

Real Estate Investing in Your 20s

For example, let’s say we invest $100 per month in Series “EE” Bonds for our kids at birth. Once they turn 20, they will start to receive $200 per month from Series “EE” redemptions. This cash flow means a lot for college—and military-aged kids.

We adults need to turn to Treasury Notes and Bonds. Treasury Notes start at 2 years and go to 10 years, while Treasury Bonds go from 20 to 30 years.

I prefer 30-year Treasury Bonds because that’s how my mind works. I want to lock in good rates for the duration. I can use high-yield bond reinvestment to ensure my interest payments continue to earn more interest.

In our 40s, we should have a large percentage of our wealth in bonds, especially if we do not have a stable pension coming to us. I love the stock market as much as everyone else, but we have too much riding on our financial future—we can’t mess it up.

USDC for the Win !!

Stock Investing in Your 40s. Speaking of stocks, it’s time to start converting from growth to income. We still need growth, but income is our top priority.

Although we are entering our 40s, we still have many financial obstacles to overcome. Our kids are joining the military, going to college, having weddings, buying houses, and having children—we need income.

Everyone loves a good Nvidia (NVDA) or Tesla (TSLA) growth story, but we must start converting some of those gains into income.

Luckily, we can grab income and growth by becoming dividend growth investors. DGI investors love stocks like Johnson & Johnson (JNJ), Costco (COST), and Procter & Gamble (PG). One of my favorites is Abbie (ABBY).

Saving vs. Investing

People will tell you that growth is vital to our long-term success. However, we have to start realizing our gains through dividends. We can’t depend on Tesla to compound OUR wealth indefinitely.

DGI investing will play a significant role in our 40s and beyond. During this time, we should focus on the four principles of dividend growth investing.

We can use a small percentage of our portfolios for income investing—where we can generate massive dividends to fund our vacations and charity.

Options Trading in Your 40s. Why trade options in our 40s? As I said earlier, we cannot depend on Tesla to compound our wealth indefinitely; however, we can rely on ourselves. 

The Magic of Investing

As part-time options traders, we can control our financial destiny as insiders. We can take a $5,000 portfolio and turn it into $10,000—all by ourselves.

Robert Kiyosaki said the best way to make massive gains is to get on the inside. When we purchase bonds and stocks, we are on the outside. 

Options trading puts us on the inside—we control everything about the experience except which direction the market moves.

In our 40s, we should take option trading very seriously because it could be our financial savior. Money is tight in our 40s, and we need any help we can get. If we learn how to set up a good portfolio, options trading can be that relief.

The Magic of Saving

In our 40s, we should set aside $5,000 in an options account to trade long strangles. With an account this size, we can safely aim for $300 to $500 per month.

If you have more capital, you can turn to the Options Wheel (selling cash-secured puts and covered calls). Using my rule of 40, if you wanted to earn $1,000 per month, you should have a $40,000 account ($1,000 x 40).

Having a small “long strangles” account is the best unless you have a massive $300,000+ financial portfolio. Most of the time having the knowledge on how to trade options is better than having bigger numbers.

For example, let’s say my son is getting married in one year, and I want to donate $10,000. I can determine the best way to arrive at the amount by trading options for a year.

She Only Wants You for Your Money

In this case, having a $20,000 long strangles account will allow me to generate those returns without much fuss. Don’t trade options without a financial goal; the wolves (fear and greed) will get you.

Putting it all together. Bonds will act as our financial foundation on top of our emergency fund. We need money that grows outside of the stock market.

We can start converting some of our high-flying stocks into dividend growth investing companies. These DGI companies are not as sexy as Nvidia (NVDA), but they grow and pay dividends—we need income.

The size of our options trading portfolio will depend on our financial goals. Everyone should have a small $5,000 long-term portfolio that generates $300 to $500 per month.

The Best Way to F.I.R.E.

Knowing how to trade options is the most valuable information we can take away in our 40s. We need a way to generate outsized returns as insiders.

Conclusion. So our portfolio could look like: 

  1. $30,000 in 30-Year Treasuries, 
  2. $30,000 in Series “I” and “EE” Bonds 
  3. $100,000 in DGI stocks 
  4. $30,000 in growth stocks 
  5. $30,000 in income investing 
  6. $5,000 in options trading

The key is understanding our financial plans and goals. Do we want to help our children with their wedding and mortgage down payments? Will they stay home with us and have their wedding in our backyard?

Retirement Planning vs. Estate Planning

These questions (and answers) will determine how we allocate our resources between bonds, stocks, and options. No matter our plans, income is always our number one concern.

The difference between being rich and wealthy is quite striking. Rich people have a massive pot of money in the form of capital gains. Think of someone who has a $3 million house in San Diego.

Wealthy people generate a lot of cash flow from their assets. Consider someone who has $1 million in rental properties and generates $4,000 per month in cash flow.

We want to be wealthy. Our 40s is the time to understand the difference between being rich and wealthy, and make choices to create income from our assets. 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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