How To Build Wealth In Your 20s (Realistically)

What's up, Graham? It's Guys here.

So, just over 4 years ago, I made a video about seven daily habits that changed my life. And don't worry if you haven't seen the video, here's what those were: creating short and long-term goals, making a to-do list every day, meditating regularly, getting on a consistent sleep schedule, exercising, going to the gym five to six times a week, not procrastinating, and getting something done the moment you think about it, including hitting the like button and subscribing if you haven't done that already. And finally, be consistent with your routine every single day.

Now, even though I don't doubt that those daily habits would help people tremendously with their general well-being in life and business, I wanted to take a slightly different approach with this video and go over the best investing habits that'll absolutely change your life. Some of these I've learned from practice, some through mistakes, and some are just common sense that people flat out forget. But real talk, all of these are habits that are actually proven to work and nearly guaranteed to make you money. Unlike shorting Nvidia, this advice has so far proven to be completely timeless to the point where you could come back to this video 10 years from now, and it's going to remain just as relevant as it is today.

So, with that said, let's begin the video, and these are the six investing habits that have changed my life.

All right, so first, it's investing as soon as I could. Now, I've got to say, from all of the general advice out there, this could easily be the most impactful in terms of how much wealth you're able to build throughout your lifetime. Because even though it might sound super basic to some people, the reality is that most will never follow it. They'll continue to deprioritize investing and focus on other expenses instead, or more commonly, they'll just think that they have their entire lives ahead of them to invest. So, what difference would it make to wait another few weeks, months, or years anyway?

Well, fine, I'm not going to lie, waiting a few extra weeks or months is probably not going to be that big of a deal in the long term. But I will say, the type of person who continually puts things off and postpones things is probably the same type of person who never actually gets around to doing something until eventually it's too late.

And here's the thing: when you're young, one of the biggest advantages that you have when it comes to investing is really simple—it's just time. Not only are you able to ride out any short-term fluctuations in the market, but you could also take full advantage of what's called compound interest. This means that the money you invest continues to grow at a faster and faster rate because that money makes you more money, which then makes you even more money, which makes you more money until pretty soon you have a billion quadrillion gazillion dollars.

That's why now you have a choice to make: you could either use this information to make you money or you could ignore it, and only time is going to tell how much that'll cost you. The choice is yours, but just consider this: if you invest $100 a month starting at the age of 20 at an average of an 8% return, by the time you're 65, that $100 a month will have turned into a nest egg of almost $540,000.

However, if instead you think, "But G, I have my entire life ahead of me. I want to go to Coachella and buy their avocado toast," and you start investing that very same $100 a month just 5 years later—at the age of 25—by the time you're 65, that amount will have only turned into $361,000. That works out to be a difference of $177,000 just by waiting an extra 5 years to invest early on. And what's even crazier is that during those first 5 years, you've only invested a total of $66,000.

This is why the money you save and invest right now is pretty much going to be the most important money you will ever have in your entire life. This also applies to times like right now when the market is trading near an all-time high. In fact, JP Morgan looked at the average returns of the S&P 500 dating all the way back to 1970, and they found that if you invested in the S&P 500 at all-time highs, your investment would have been higher a year later 70% of the time, with an average return of 9.4%, versus the 9% on average when investing at any time.

A wealth of Common Sense blog also seconds this finding, stating that all-time highs are usually followed by more all-time highs. Since the 1950s, as he said, if you invested in the S&P 500 on any given day since 1988, your average total return a year later would have been just shy of 12%. However, if you only invested on days where the S&P 500 closed at an all-time high, your average total return would have been nearly 15%.

That's not to say that you should be dumping all of your money into the markets because the future is always going to be uncertain, but it is to say that you shouldn't let headlines get in the way of your investing as early as possible. Even for me, throughout my early 20s, I was just in overdrive investing mode because I realized the significance of compound interest. I thought to myself that I would never have a better opportunity to invest than right now. Like, I just saw every $1 I had at the age of 20 as being worth $21 by the age of 65.

So if there was something I would want to buy, I would multiply that price by 21, and then I would think to myself, is that worth that much money in future dollars to go and get this thing? Most of the time it wasn't worth it, and I would rather just invest instead.

Next, my second most important investing habit was not trying to time the market. This one is probably the simplest, most factual piece of advice you will ever hear when it comes to investing, but it's also the most difficult to follow. That's because pretty much every investor out there thinks that they're smarter than everyone else—that this time is different. They'll read up on all the signs and charts that indicate future price action, and then they believe that they could outperform every other professional investor by timing their investments.

But unless you get absolutely lucky or you work for Congress, you're probably not going to make a lot of money doing this or you're going to lose. Don't just take my word for it either—here are the facts to back this up. Since 2003, had you just bought and held, your annualized return would have been about 99.8%. But had you been trying to time the market and missed just the top 10 best trading days over that time frame, your annual return would drop all the way down to 5.6%.

All it takes is to miss the top 30 best trading days over 20 years, and all of a sudden, your return drops to just 8%, or basically below the rate of inflation. There's also another study out there that shows that generally speaking, the more trades you make and the more you try to time the market, the lower your overall return becomes. This is why it's proven that the average investor is absolutely horrible when it comes to investing, and they dramatically underperform the market.

So, in terms of what you could do about all of this, it's very simple. All the research out there has shown that since 1926, a 20-year holding period has never once produced a negative result. Or basically, if you just stay the course and do absolutely nothing—like dead people—you'll probably be just fine. In fact, just buying into the market immediately, regardless of where it's trading, has outperformed trying to time the market 71% of the time.

That's why, from my perspective, your goal should be to invest as much money as possible and keep it there for as long as possible. Then, try to find the lowest entry point or selling at the peak and then trying to buy in lower, because your chances of getting that right consistently are pretty much non-existent.

Third, you need to get in the habit of only investing in things that you understand. Now, I know this is another one where people are going to say this is super obvious—stop telling us stuff that we already know. We already get this. But yeah, apparently, it's not common sense because people ignore it, and they do it all the time. They invest in something because someone told them it was a good idea; they see the price going up, and they want to buy in before they miss out, or they follow someone who appears to know more than they do.

Well, I shouldn't have to say this, but, uh, yeah, don't do that. In this circumstance, it's probably better that you don't invest at all than invest and put your money in something you don't fully understand. Of course, I'm not saying that you have to be a full-fledged expert on the US equities market before going and buying an index fund, but you should at least know exactly what you're buying into, how the investment makes you money, how long you have to realistically hold on to it to turn a profit, and how much volatility you could realistically expect to handle.

If you're not able to answer those specific questions and then explain why your money is best suited for that use, then my recommendation is probably don't invest until you learn more. Even if that means you miss out on some potential profits, just trust me: in the long term, you'll end up saving a lot more money in opportunity costs than you will by following random things that you don't know much about.

Fourth, the next investing habit that works really well is by not investing money that you need in the short term. Like, here's the thing: anytime you invest, there's always a chance of it losing value in the short term. That's also codeword for me saying that every single time I buy an individual stock, it falls the moment after I buy it.

This is why investing should always be seen as a long-term strategy. For the most part, you cannot predict where stocks are going to be trading at a week, a month, or even a few years from now. But once you zoom out, you could see that over a period of 10 to 20 years, your chances of coming out ahead profitable are pretty good. So, for that reason, investing any money that you need in the short term is probably not a good idea because there's a lot of risk involved.

Just take a look at what happened back in March of 2020. There were so many investments that dropped 50% or more in a matter of a month. Had you invested all of your savings in January that you then needed to use in March or April, chances are you'd be screwed and be forced to sell at a loss. However, on the other hand, if you invested money that you knew you didn't need for the next 10 years, well now those investments would be up almost 200% without you doing a single thing other than holding.

So when it comes to this, here's what I personally do: if I know I need the money in the next one to three years for something like a down payment, paying taxes, or another use, I won't invest the money. Instead, I'll just throw it into a savings account, money market fund, or treasury earning about 5%, and I'll keep it there. Sure, I could miss out on potential gains in the market, but it also guarantees that I'm not going to lose money and that I'm going to have everything available by the time I actually need it.

For me, that peace of mind goes a very, very long way in terms of thinking concisely and never having to panic sell if I don't absolutely need to.

Fifth, anytime it comes to investing, get in the habit of investing consistently. For me, straight up, investing is just a way of life. It's not something that I dabble with here and there. It's not something that I do when I only feel like it, and it's not like a hobby I'll get bored with after a few weeks. Investing is really meant to be as consistent of a habit as brushing your teeth twice a day, or think of it like going to the gym.

Once you get in a routine of investing consistently, it just sticks after a while, and then eventually it becomes second nature. Like, you do it without even thinking about it. The truth is, it's this mentality that's going to allow you to turn small amounts of money, which might seem inconsequential today, into large wealth later in life. Even just $100 a week—chances are there's some things that you would be able to cut back on or downgrade just to be able to save this.

Let me give you an example: if you literally did nothing besides invest $100 a week, preferably in a Roth IRA, so it's tax-free, at an average of an 8% return, you're going to have over $2.3 million saved in 45 years. Even if you don't have the $100, let's just say you have $50 a week; in that case, you would still have $1.2 million during that time frame.

And the best part about this is that it's really as simple as automating your investing as much as you can. For instance, you could set up automatic withdrawals to go and buy an index fund on a regular basis, and once you set it up, you'll never have to think of it ever again. It's out of sight, out of mind.

Oh, and also, if you want to get started doing something like this, I've got an affiliate link down below in the description where you could get some free stocks worth all the way up to a few thousand. I do get a commission when you sign up, but you also get some free stocks in the process. So if you're going to do that, you may as well get some free stocks, so enjoy.

Anyway, when you're investing, just plan for it to become a part of who you are, and make sure you do it consistently on a regular basis. It doesn't need to take a lot of time, but once you automate the process, it does become incredibly easy.

And finally, sixth, when it comes to investing, get in the habit of thinking independently. This one, I admit, is probably the hardest to do from everything that we've talked about, but it's also going to be the one that will make you the most amount of money if you're good at it. What I mean by this is that you have to trust your instincts and research, search, and not be swayed by someone else who says otherwise or disagrees with you.

Now, I'm not saying that you should automatically tune everybody out or not listen to anything, because that's stupid. I'm also not saying that you shouldn't listen to any criticism or someone else's perspective, but you should find a healthy balance between analyzing all the information that's out there and coming to your own conclusion.

Honestly, doing this has helped me make some of my best investments ever, like buying real estate. I was told so many times that I was making a mistake, that I should wait a little bit longer, and that prices were going to go even lower. This was back in 2011 and 2012. Thankfully though, I didn't listen. I believed in my own research, I understood the investment, and I wasn't trying to time the market.

Then we have another example with Tesla stock. I started buying it at an adjusted price of about $18 a share, but as soon as I bought it, it dropped. In fact, I don't think there was a single day I was in profit until it fell all the way down to like $12 a share. But I didn't worry about a thing, despite every headline saying it was a worthless, overhyped company. It was the most shorted stock on the market and it was going to zero. For me, I just believed in the product long-term.

I really like driving a Tesla. I invested money that I didn't need, and I understood the risks. Sure enough, the stock turned around over time, I began selling off my positions, and then eventually, I used some of that stock to buy an original Tesla Roadster.

Now, certainly, this is not the case with every single investment because I've also made investments that have lost money. But I will say that by thinking for yourself, not being swayed by others' opinions, and doing your own research, you'll greatly outperform just following the herd.

So, it's really from these six habits that I formed my entire investing career. In fact, I can't think of a single investment that I've made without taking all of these into consideration. And like I mentioned earlier, everything here is meant to last you for life.

This isn't just how to invest today or how to invest in 2024. Instead, this is something that you could take with you forever. It's something that you should save and come back to from time to time. Anytime you're thinking of investing in something or buying into something you don't fully understand, just research as much as you can, take everything into consideration, get as many different perspectives as possible, and no matter what, hit the like button, subscribe, and get some free stocks if you haven't done that already.

So, with that said, you guys, thank you so much. Also, feel free to add me on Instagram, and don't forget that I also got a newsletter where I post every single week deep dive topics just like this. So if you're interested in following along, it's totally free, and you get topics like this delivered in your email in more detail than I'm able to include in YouTube videos.

So, thank you guys so much, and until next time!