The MainStreet Guide to Investing in Your 30s

  • Older and Wiser

    Hitting your 30s can be a sobering moment for a young adult, and it can also bring new responsibilities: marriage, a home purchase, increased earning power and new additions to the family. And as your income, costs and debt load all change, you should adjust and refocus your investment strategy. We spoke to investment advisers to get their take on how the average 30-something should be investing his or her money. Here are their tips. Photo Credit: Getty Images
    Pay Down Your Debt
  • Pay Down Your Debt

    Back in August we spoke to advisers to get their tips for 20-somethings investing for the first time. One common refrain was that you should pay down your debt – especially credit card debt – before you start getting into the market. After all, the interest rate on your credit card is likely higher than anything you’d get out of the stock market, so using your money to pay that off makes good financial sense. If you’ve still got credit card or student loan debt as you head into your 30s, the same rule applies. And given how much debt people carry when they finish college or graduate school, you may very well have a mountain of debt you should be dealing with even as you enter your 30s. “Any non-mortgage debt, including student loans and credit cards, should be eliminated first, before you start getting into a solid investment plan,” says Daniel DeSimone, director of Citrin Cooperman Wealth Management. There are exceptions, of course. DeSimone points to the hypothetical case of a new medical school graduate carrying loan debt in the six-figure range. Given how long it will take to pay down that debt – and the projected earning power of a doctor – he says that he would advise a client to start investing before paying down the student loan debt. Photo Credit: Getty Images
    Keep About the Same Level of Risk
  • Keep About the Same Level of Risk

    It’s generally accepted that you should keep a riskier portfolio at a younger age, when you have more time to recover from market stumbles; as you get closer to retirement, you should reduce risk by holding less stock and more bonds. Still, most advisers agree that investors in their 30s should be willing to stomach about as much risk as they did in their 20s – so long as they have a safety net in place. “You want to make sure you have an emergency reserve account and disability insurance,” says Diane Pearson, an adviser with Legend Financial Advisors. “If you have these fundamentals in place, I believe that you can keep the same amount of risk as you had in 20s.” Photo Credit: Getty Images
    …But That Doesn’t Mean All Stocks
  • …But That Doesn’t Mean All Stocks

    It’s one thing to tolerate a high degree of risk in your portfolio. It’s another thing to bet it all on black, so to speak. “As a 30-year-old, you’re conditioned to believe that you can afford to be 100% in stock because you have years to go before retirement,” says DeSimone. “We know that’s not the case.” He says that a “properly engineered” 401(k) with 75% stock and 25% bonds, in which the bonds are diversified and 20% of the stock is in international funds, will beat a 100%-stock portfolio. Take risks, but don’t bet the farm on the stock market just because you’re on the right side of 40. Photo Credit: Getty Images
    A Word on Kids
  • A Word on Kids

    If you’re planning to have kids, there’s a good chance you’ll have them in your 30s. This will inevitably change your saving and investment strategy, and you might be tempted to save less for your own retirement so that you can put more money toward child-rearing expenses and college funds. But it’s important not to go overboard and neglect your own long-term planning. That’s according to the National Endowment for Financial Education’s Paul Golden, who is himself a father in his 30s. “Kids are expensive, and you might have to make some concessions,” he says. “But remember: There aren’t loans to fund retirement, but there will be loans to fund college.” Golden compares it to the instructions accompanying the drop-down oxygen masks on airplanes: Put your own mask on first, then help the child sitting next to you. Photo Credit: Getty Images
    Another Word on Kids
  • Another Word on Kids

    We’re not saying that you should leave your children to fend for themselves while you polish your nest egg. On the contrary, the arrival of children into your life should prompt you to start thinking seriously about estate planning. Yes, even in your 30s. “I always ensure that a will is drafted to make sure a custodian is appointed in case they pre-decease their children,” says DeSimone, who adds that this important step is often neglected by otherwise-intelligent investors. “People don’t want to face a topic like that.” Photo Credit: Getty Images
    Don’t Go Crazy on Real Estate
  • Don’t Go Crazy on Real Estate

    Kids aren’t the only big life change to come in your 30s. You’ll also be thinking about buying a house for the first time, and the current state of the housing market means that your timing is perfect. But it’s important not to let the rock-bottom rates entice you into a real estate investing spree. “The way I feel is that the less debt you have, the better you are,” says Devin Pope, a wealth adviser at Albion Financial Group. “I don’t think it’s a great time to leverage up just because it’s a great time to get a good interest rate.” That’s not to say that buying low on real estate can’t work for you, but don’t get up to your eyeballs in debt just because it’s a buyer’s market. Photo Credit: Getty Images
    Get Professional Help
  • Get Professional Help

    In our guide to investing in your 20s, we noted that you should always take advantage of employer matching with your company’s 401(k). The same holds true in your 30s – that’s free money, after all. But it’s not enough to just contribute the maximum and then leave it unattended. You should also constantly monitor its performance and allocation – a task you may want to leave to a professional adviser. “It was astonishing to find out how rarely people log in [to check their account],” says DeSimone. “Employ the services of a CFP, CPA or investment firm to advise you on your 401(k). It’s one of the most neglected investment vehicles today, and it happens to be the one that turns out to be the biggest.” Pope, of Albion Financial Group, agrees that your 30s are a good time to start hiring professional help to tend to your finances. “You should have an investment team: A financial adviser, accountant and estate planning attorney,” he says. “You get married, you’re having kids and there are other major life changes, and having a strong team can definitely help you.” OK, so it’s probably not shocking that financial advisers would suggest you get a financial adviser. But the point stands: As your earning potential rises and your financial picture grows more complicated, professional help may be a good call. Photo Credit: Getty Images
    Don’t Get Frustrated
  • Don’t Get Frustrated

    As the costs of adulthood – marriage, childcare, a mortgage – begin to pile up, you might begin to despair that you’re not saving as much as you used to. And as you become more invested in the market, you might find your hopes rising and falling with the S&P 500. Both impulses are understandable, but it’s important to stop and consider how long you have to go before retirement. “It’s easy to get frustrated and say ‘god, I’m only setting aside $50 of each paycheck,” says Golden, of NEFE. “Be patient, and ride out the inevitable daily news of stock market fluctuations.” Photo Credit: Getty Images
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