How to Invest at Every Income Level in Your 20s

A lot of the advice that you hear out there about investing, including quite a few videos on this channel, are just general. They apply to everyone. Buy this kind of stock, buy real estate, you'll make this amount of money, this is a good return, this isn't. But a fundamental layer which buckets these different investments before you even talk about them is the amount of capital available to invest. And that's the layer I want to tackle in this video, which is how to invest at every income level in your 20s. And by income level, I mean the income level that most of you watching this are probably at. So I'll explain how that's classified in a second. And so after you watch this, after you understand this, then we can go and talk about within the bucket that you're in that's best for you, how to go and maximize the return that you get with that capital. But this is step one, this is what has to happen first. There's also two high level buckets that really determine quote unquote financial freedom and what bucket you are sorted into. So I want to start off by explaining that. That in mind, we're going to jump into the video. It's going to be a fun one. Let's go. So I want to talk about a company that's going to go public on the New York Stock Exchange this Friday. And that's because most people have the complete wrong read on this, and I did before I actually learned about this. So you've probably seen the headlines about the Enhanced Games. That's Vegas, May 24th, $25 million prize pool. You have these Olympic gold medalists showing up ready to break world records under medical supervision, wild concept, and a wild amount of media coverage around it. But what everyone is missing, including me a few days ago, is that the games aren't actually the business. And that is why today's video is sponsored by Enhanced. Right now they trade on APAD on the NASDAQ through a SPAC. And starting on this Friday, May 8th, they list on the NYSE under ticker ENHA at a $1.2 billion EV. So the actual thesis is that the games are the marketing engine, not the product. And so this $25 million event, these world-class athletes, all the media coverage, all of this pulled off two weeks after this listing. It's all a customer acquisition funnel for the consumer business that sits underneath it. And that real business is called Live Enhanced. It's a direct-to-consumer telehealth platform that's already live, already shipping products. And it provides all of these things under medical commission oversight. And the CEO has said that early customers aren't discount shopping. They are stacking multiple products onto subscriptions. And so that's what takes that event-style marketing approach and turns it into a recurring revenue business. And the way I see it, this is a category creation play. They're not trying to be the next HIMSS. They're trying to define performance medicine as a new D2C category. And even then, that company is doing over a billion dollars in revenue without the kind of media moment that Enhanced is about to have on May 24th. So again, they are listing this Friday on ticker ENHA on the NYSE. That'll bring in about $200 million in additional capital to fund the wider consumer rollout. And the inaugural games two weeks later are, again, that top-of-funnel customer acquisition strategy to get the word out about the platform. So whether you're long the stock or just watching the strategy, you can learn more and see if this fits into your investment thesis at this link on the screen or in the description. This is sponsored content. This is not financial advice. And always do your own diligence. And in this case, that's kind of fun because some of your diligence can be watching the games themselves. Again, links are in the description. And let's get back to the video. So of those two buckets, the first is income, and then the second is savings. And those both really, really matter. If you have a person who makes a million dollars a year but spends a million dollars a year and has $5,000 in savings, or you have a person who has $20,000 a year in income and has $500,000 in savings, they're both actually in pretty difficult positions. In either case, both of those people, if you look at one side of the equation, are doing really well. But once you factor in the other half, the volume of risk that they can take, and therefore the volume of reward or returns that they can pursue, is not what you would think. And generally, if both of those things are true, that's the point where money starts to matter less as a stressor in your life. As in, your income exceeds your expenses, it will likely remain that way, and you have some volume of savings. And that's going to tie into these buckets. Because you're in your 20s, maybe you're just starting out in your career, or you're in the first 10 years. So the amount of money you make will go like this. But the problem is, savings is a lagged indicator. The savings only start to kick in and compound 5 or 10 or 15 years after you actually start making more money. And that's because the investments themselves are going to compound. And frankly, saving money is really, really hard. Like, you can make $150,000 a year. You can make $500,000 a year in New York. And even at $500,000, you're paying 30% to 50% of that in taxes. Your rent's super high. Your lifestyle kind of creeps up. You go on some vacations. You pay for a car, et cetera, et cetera. Even if you are in the 99.9th percentile of income for your age, to save, say, $1 million if you make $500,000 a year, it could take 5 to 10 years. Much less if you make $50,000 a year, $100,000 a year, or a quarter million dollars a year. So with that frame in mind, the first wealth or income bucket we'll consider is you have no money. You work a minimum wage job. You have no savings, or you're unemployed. I don't need to state the obvious here, but don't invest. Do not think about saving any money at all. If you make $34,000 a year, you get paid $11 an hour, and you're in your 20s, that's the other piece that matters. Do not think about stocks, about real estate, about absolutely anything related to investing. All you should be focused on is raising your income level. And that's because both the difficulty of and the marginal return of going from $11 an hour to 16, or to 20, or even to 30, that is 99 times out of 100 going to beat out the returns you would get by trying to save like $600 a year and then making 8% a year on that after inflation for 40 years. And there are a lot of ways if you make $13 an hour to go to $20 an hour. Or maybe you're unemployed and you're in school, right? The same deal applies there. Putting all of your effort into getting a good job, into starting a business, into raising your future short-run income is going to beat out taking the very little amount of capital or resources that you have and trying to invest it in the most competitive games in the world. So then if we think one level above that, maybe you have a few thousand dollars in the bank and your income exceeds your expenses. You are employed, you make money, and let's say you have anywhere from $5,000 to $20,000 in savings. That is going to be the majority of you watching this in your 20s. So you're not broke anymore, but you're also not wealthy. You're at the point where saving is really difficult because you're just getting the ball rolling. But also you're not broke. You can eat, you pay your rent, right? You are a stable adult. Here's the thing. If you are in your 20s, all of this has that asterisk. Still do not seriously invest. If you have $12,000 in your savings account total and you make $50,000 a year, you are still much better off taking that $12,000 a year and trying to use it to get your income to go from $50,000 to $60,000 or $70,000 than you are taking the $12,000, trying to pick a bunch of individual stocks or just buying the S&P and best case making like 6% a year on average for 40 years. Now that may be a bit of a controversial take, but look, I have faith in you. You are young, you are in your 20s. If you can go from the trajectory where you make $50,000 a year and you get a raise every few years to $70,000 a year and you get a raise every few years because you're so young, that will make the difference over squeezing out an extra lifetime, even 100% return on the very still little amount of capital that you have. And generally speaking, how often something occurs is going to be inversely proportional to the difficulty of acquiring it. And so unless you're already in the 80th, 90th plus income percentile, which most of you watching this are not going to be at, then it's not going to be the end of the world difficult for you to get up to that income trajectory. So things like investing in AI tools to learn how to use those for your job or for applying to other jobs, a nice suit for networking, just buying books, just a WeWork membership so you can work on the weekends on your side hustle or on a project, whatever the investments are that can help you. If you put the effort in, raise your active income when you're 22 or 25, that is the best thing to invest in. At this stage, you still want to invest in yourself. And sure, if you want to learn how stocks work or you want to say, get in the habit of investing, you can send a few hundred bucks here and there to an investment account. You can start buying some indexes. But probabilistically speaking, you being super invested in your crypto and your stocks, that is going to be inferior to this strategy within this income and wealth bucket. That in mind, let's say you're still in your 20s, but you now make a good amount of money. Let's say you make $100,000 a year plus and or, and it could be an or, that's fine as well. You have over $100,000. You have six figures in savings. So first off, congratulations, you're doing really well. And now at this stage, you can finally start to really think about investing. And why? Because it actually matters. It will meaningfully change the volume of wealth, of resources, of ability and freedom that you end up with at a later time. If you have $100,000 in savings, when you're 25, when you're 29, whatever it is, on average, historically, money will double every seven years when invested. So if we subtract say 65, the average age of a retiree from 29, we get 36 divided by seven is five. And so if we double $100,000 five times, and that's if you're 29, not 23, we go 200, 400, 800, 1.6, $3.2 million if you're 29 and you invest 100 grand. If you are seven years younger than that, so 22, you're talking $7 million that you can get by just getting the average market return. So at this point, two general considerations should exist. Number one, you do want to diversify because at this point, you have a lot to lose. If you mess up, you bought some super sketchy thing, you lose all of your money. I'm sure you can make it back because you've made it in the first place at that age. But that's not ideal versus just, hey, you would actually get a lot out of that if you just bought the S&P and you made your 8% a year. And so number one, diversify, right? You don't need to take insanely sketchy swings. But number two, and these can both be true at the same time, is you should pursue a higher risk return profile. And that's because on average, if you pursue more risks, so we hire variants of returns with enough swings at bat, you will average out to a higher return. And the thing is, you make a lot of money because you're in your 20s, you have over $100,000 in savings, and you have a lot of swings at bat. You have decades and decades over which to compound that capital. So power loss here work in your favor. You want to take a lot of swings. You want to diversify those swings. But if all of the swings on average are on a higher risk threshold, let's say a retiree would be investing in, good. Because over time, you will get more return, more juice out of that squeeze with that strategy. Another way to frame this is at that age with that volume of savings, you are still focusing on capital accumulation, not capital preservation. So those three levels or buckets are going to be where nearly all of you fall when you're watching this. I want to throw in one higher level, which is if you make an extraordinary amount of money, you are 99.9th percentile plus in your 20s for income or savings. And off the top of my head, that's something like $700,000 a year. Well, that'll be higher if you're nearly 30 versus close to your teens in the U.S. Of course, that's going to vary by country and or worth a few million bucks. At this threshold, you did something which made you an enormous amount. Maybe you're a lawyer or a doctor. Maybe you have your own business, whatever it is for you. At this point, you are focused on capital preservation. You are going to be making such an extraordinary amount of money that you don't need excess returns. You don't need to make 11% a year versus 6% versus 8%. You should just double, triple, quadruple down on what made you that high income in the first place. And you can probably meaningfully beat all public investments by taking your capital and reinvesting it in that. And that's the point at which you start pursuing alternative investments. You start buying every asset class. You're giving money to money managers. And that's not an enormous amount of money when you're in your 20s, or it may not sound like an enormous amount. But if you can put away $300,000 or $400,000 a year starting in your 20s, you're talking about tens of millions to hundreds of millions of dollars by the time you want to retire. That in mind, that's the video. So I hope you found that useful. That's just my take. Go do as you will. But I hope this video and this channel helps you out as you run through, speed run those different income buckets. I appreciate your time and being here. And I will see you in the next one. Cheers.