What I’m doing with my money at 22 – Spence – Medium
Like many of you, I’m always seeking out opportunities to grow my money. I’ve been investing/ trading for the past 5 years, while working a full time job and saving every penny I can. With trial and error, I’ve explored many investing strategies, and built a strong market awareness. The first 5 years of my investing career was about building domain skill, learning how to use different products, and gaining experience. The next five years of my investing career will be focusing on building a core portfolio of different investments, and building a financial foundation for my future. Being only 22 years old, I’m in it for the long haul. So my strategies and philosophies may be different from yours, depending on your time horizon.
My current outlook on financial markets isn’t relevant, everybody has their own opinion, and frankly nobody has a crystal ball. Stocks will always have the greatest upside potential, over all other asset classes. Stocks provide the greatest liquidity, and it’s the only two sided market to participate in as a retail investor, which means no matter what the market is doing, somebody, somehow, is making money. Whereas in other asset classes, the market isn’t liquid, and it’s only a one sided market for retail investors. For instance, real estate is an illiquid market, it’s much more difficult and time consuming to sell a piece of real estate than it is to sell a stock, which could be troublesome for investors who have accelerated liquidity needs. With that being said, I’ll always have a majority of my money in stocks for the foreseeable future.
Owning stocks is capital intensive, and can leave investors vulnerable to large capital fluctuation due to the volatility in stocks. In the unfortunate event of a deep sell off in a stock you own, for any amount of reasons whether it be corporate restructuring, proxy battles, buyouts, bankruptcy, etc.. a portfolio stands at tremendous risk, it’s detrimental to a portfolios capital exposure to only own stocks. This is why I also incorporate options in my portfolio. Options reduce capital exposure, and can limit losses in a downward market. I won’t go too in depth today on options, I’ll write another article solely about options at a later date. The takeaway is, never be 100% invested in one stock, asset class, or strategy. A strong portfolio will be diversified in multiple products, and strategies.
At the same time, I’m always building up my cash pile for other opportunities that might present themselves later on in my life. However, I’m not just leaving my cash in a standard savings account or under my bed. Instead, I have about 20% of my cash in a high interest earning savings account. I’m receiving 1.9% APY at a zero risk free rate. Which isn’t much at all, but it beats inflation, and it’s better than earning only 0.03% APY at a regular savings account.
I’m always seeking out advice, and learning through my experiences. I’m on a long journey trying to achieve my financial goals, and I enjoy sharing my experiences with others. Personal finance to me is a never ending game, and I love playing it.
Comments, or Suggestions?
Tweet me @Spencer_Enos or comment down below. How are you managing your money?