Financial Hypothetical Question

[epbrown]

One of my co-workers is always asking the older folks for investment advice - he's 19 y.o., makes $30k/year, and lives at home. I'm curious what you guys would tell him.

Full disclosure - like most people his age, he's really just looking for some get-rich-quick scheme, so he's ignored all the good advice he's gotten so far and steadfastly refuses to believe the older guys about the biggest assets he's got: almost no expenses, a decent job and he's only 19. He comes to me every week with some crazy investment idea - the last was fractional collector car investment, and Tuesday he wanted to know what he could put $5k in that would net him $3k in a couple of years - so I'm just curious what you guys would tell him.

It's entertaining in a way - we've given him advice that would make him well-off by the time he's 30 and financially independent by 40, but he'd be "ancient" by then. Mostly we fantasize about knowing what we know now at 19.

[pwd72s]

Good luck...

[Ayles]

Save a little, have fun. No credit cards or financing wheels for his car... stay out of debt and all will be fine.

[tdw28210]

Dollar cost average into some aggressive growth mutual fund(s).

[masraum]

His best bet is small cap value indexes. They have the highest growth historically, but are also the most volatile. And based on the future which no one can predict, they may or may not pay off in 5 years. Equities are a crap shoot on the short term. He needs to be invested for the long term.

Tell him he needs a time machine.

[jgreen]

Move out and figure it out on your own.

[MBAtarga]

plastic my son - plastic!

[flatbutt]

Colorado marijuana farm

[Pazuzu]

Of all of the people I know with various investments, the only ones that really seem to make money, day in and day out, year after year are the ones who own real estate.

Have him buy a small cheap condo in an apartment building type setup. $40k.
Rent it out. Profits all go into an account.
When you pay it off, immediately buy the condo next door.
Rinse, repeat.
In 10 years you'll own the building. flip the whole thing and start over with $150k condos.

In 20 years, he'll own strip malls and be working from home, semi retired.

EDIT: Nevermind, I didn't read your last line, forget everything I said. Tell him to invest in Bitcoins.

[island911]

Tell him what the mortgage (+tax & insurance) would be on the house that he is living in for free, if he had to buy it today.

Read: sounds like he needs some perspective.

[masraum]

Tell him to take the $5k to Vegas and put it all on red.

[drkshdw]

If I knew then what I know now, I would take what rent would be if I lived on my own and every month, put it into a savings account. After a couple years, use that money down on my own house. One with 3 or 4 bedrooms and take on some roommates to cover the mortgage and utilities. After a few years, do it again with another. And by the time you're 40 you have 20 rentals under your belt and you're set.

I know it's hard for a teenager to think like this but you don't get rich by doing something today. You get rich by what you did years ago.

[john70t]

He's restless and self-starting and motivated. Those are all good things. But he doesn't have focus right now and he's looking at the entire field. He wants it all and he wants it now. But sometimes a person can stretch themselves too thin in too many areas and it tears them apart emotional-wise. Two opposing decisions get in conflict and indecision does the rest, half-assing both and then losing both.

In any specialized field there are going to be a small group people there and they know the secrets of the industry and aren't giving up their market share easily. Breaking into an unknown field big requires big somethings. There are plenty of scheisters willing to take his investment money and skip town. Happens all the time.

Saving just a small amount of money at the age of 19 consistently and investing it safely will guarentee turn him into a millionaire by retirement age altough that won't make as much difference then. Cut his play money in half and only gamble a portion. Living at home is saving him money now and he should be helping the folks naturally. Use his time to learn evaluate and then bite. But I play on the cautious side.

[KFC911]

Originally Posted by masraum

Tell him to take the $5k to Vegas and put it all on red.

...or black .

....at 19....financial advice???

Wear a condom

[RANDY P]

1)-don't get into cars.
2)-don't buy love.
3)-buy a house.
3)-see #1 #2, and 3.

[KFC911]

I'm not into the "buy a house"/condo advice....not at 19 or even early 20s for MOST folks at that age....they are anchors . Different strokes....lots of ways to get there however...YMMV.

[Rick Lee]

I bought my first house at 25 and made about $150k cap gain when I sold it. Yeah, it was an anchor, but I wasn't planning on going anywhere for a while. For the first few years I had roommates pay most of the mortgage for me. My share was about $90/month. The sale of that house paid for my 993 and the down payment on my next house.

[KFC911]

...at the age of 25 is a just bit older Rick

[ckcarr]

What is his current job? Does it have any future?

Does he have any plan to educate himself, either military, college, or a trade school (the way to go IMO). Or just hunker down and do what he's doing..

A house has always been the number one investment, long term. Short term, if you can't weather the economy and financial ups and downs it can ruin you. Plus, at least out west, you need around $50,000 to $100,000 down to even consider buying a home right now.

The best advice has always been marry rich...

[LWJ]

First. He isn't really listening. So this is for other 19 year olds that will listen.

1) Live well below your means. Try to spend 50% of your take home. Invest the other 50%.
2) Leverage with an eye on risk.
3) I like real estate. If he can buy a duplex, triplex or four plex, do it.
4) Hire a property manager for the legal end but do as much of the maintenance as possible yourself.
5) Add to the mix every year but caution to being over extended. I think Oregon is at peak value on RE for a while. It is very pricey in Portland.
6) I am a big fan of buying cashflow. Working people will always need housing. Buy in secondary or tiertiary markets that have good infrastructure.
7) Work on your career. Investments are great but a career can pay very well which gives you more to invest.
8) Marry well. A sane spouse is a great investment. Divorce is a huge destructor of wealth. Best yet, marry someone with a killer career or portfolio.
9) Life -work balance. I could retire today at 52 but I still would be earning / doing something with my time. I have friends that are trust funders who loaf at home all day. I don't envy them.
10) Remember that children are costly.
11) Don't be a zealot. Your time on Earth is limited. Enjoy it.
12) Be a good human. Karma pays large dividends.