Investing Fundamentals - Gen Z

Coach Al
Jan 26
6 min read

Updated: Feb 14

Investing can feel like a maze, especially when you're just starting out. But what if I told you that with a little guidance and some consistent effort, you could build real wealth over decades? Yep, it’s true! Whether you’re switching jobs often or just want to make your money work harder, understanding the basics of investing is your first step. Let’s dive in and make investing simple, practical, and even a little fun.

A young adult saving $300 per month to become a millionaire

Why Investing Early Matters More Than You Think

You might be wondering, “Why should I start investing now? Isn’t it risky?” Here’s the deal: time is your best friend when it comes to investing. The earlier you start, the more your money can grow thanks to something called compound interest. Imagine planting a tree today that keeps growing bigger and bigger every year - that’s what your investments can do. Understanding investment fundamentals is the key to financial security.

For example, saving just $300 a month might not seem like much, but over 46 years, it can grow into a substantial nest egg. Let’s break it down:

Monthly investment: $300
Years invested: 46
Average annual return: 8% (a reasonable estimate for stock market returns). The market return over the past 50 years has been roughly 10%.

Using these numbers, your investment could grow to over $1,506,334! That’s the power of patience, consistency, and compound interest. Imagine if you could contribute $600 each month to get 3 million. Don’t believe my numbers, you can run your own projections using a retirement calculator from any large financial firm. Coach Al wrote a book titled “Dare To Succeed — Finding Passion To Fuel A Purpose-Driven Lifestyle.” It has many great ideas to help you understand investing, business, and multiple streams of income. Check it out on Amazon. He also teaches a workshop titled “Turn Kids Into Millionaires” to help parents coach their young adults for success. Coach Al is a certified life coach and can assist you with this effort. Contact Coach Al for a free 30-minute consultation at https://www.tips4living.org/consulting.

Understanding Common Investment Instruments: Stocks, ETFs, and More

So, what exactly should you invest in? Here’s a quick rundown of the most common investment options:

Stocks: Buying a stock means owning a small piece of a company. Stocks can offer high returns but come with higher risk. They’re great for long-term growth if you’re comfortable with some ups and downs. Most people don’t like risk, so they buy into a stock fund (ETF) that holds multiple individual stocks.
ETFs (Exchange-Traded Funds): Think of ETFs as baskets of stocks or bonds. They offer diversification, meaning your money is spread across multiple companies, reducing risk. Plus, they’re easy to buy and sell.
Bonds: These are loans you give to companies or governments. They pay you interest over time and are generally safer but offer lower returns.
Mutual Funds: Similar to ETFs but usually actively managed by professionals. They may charge higher fees, but they could be a good option if you want expert help.
IRA: Individual retirement accounts. They come in the form of a 401K from an employer, an IRA you buy from an investment broker like Charles Schwab, Fidelity, or Vanguard, or a ROTH IRA, which is tax-free later, subject to a few rules.

The key is to mix these instruments based on your risk tolerance and goals. For young adults, a stock-heavy ETF focused on growth sectors can be a smart choice.

Why a ROTH IRA Might Be Your Best Friend When Switching Jobs

If you’re someone who changes jobs frequently, a ROTH IRA could be a game-changer. Unlike traditional 401(k)s tied to your employer, a ROTH IRA is an individual retirement account that you own and control. Here’s why it’s worth considering:

Portability: Your ROTH IRA stays with you no matter where you work. No need to worry about rolling over funds every time you switch jobs.
Tax Benefits: You contribute after-tax dollars, so your withdrawals in retirement are tax-free. This can be a huge advantage if you expect to be in a higher tax bracket later.
Flexibility: You can invest in a wide range of assets within a ROTH IRA, from stocks to ETFs to bonds.

Setting up a ROTH IRA is straightforward, and many online brokers offer easy-to-use platforms. Plus, contributing regularly, even small amounts, can add up big time. If you do have an employer 401K, then contribute enough to get the full company match. Rather than maxing out your 401K account next, consider opening a ROTH IRA because of the flexibility and tax-free advantages. Once you max out the ROTH IRA, then focus on maxing out your company 401K. Because most people can’t afford to max out their 401K account, they are better served maxing out a ROTH IRA. Your retired future self will thank you.

Eye-level view of a laptop screen showing a ROTH IRA investment dashboard — Managing a ROTH IRA account online

How to Start Investing Today: Clear Steps to Follow

Ready to jump in? Here’s a simple roadmap to get you started:

Set Your Goals: Why are you investing, and what are your goals? Retirement, buying a home, or just building wealth? Knowing your goals helps shape your strategy.
Build an Emergency Fund: Before investing, save 3-6 months of living expenses in a safe place. This keeps you covered if life throws a curveball. I keep mine in a Robo managed brokage account that uses compound interest for better returns.
Choose Your Investment Account: Open a ROTH IRA for retirement or a brokerage account for general investing. Don’t forget to contribute enough to your company’s 401K to get their match.
Pick Your Investments: Start with ETFs or index funds for broad market exposure. Add individual stocks if you want a more hands-on approach.
Automate Contributions: Set up automatic monthly transfers (like $250) to your investment account. This keeps you disciplined and consistent. If you don’t think you have money to save, then use half you next raise in pay to start investing. Contribute half of all future raises until you reach your target.
Review and Adjust Annually: Review your portfolio annually and adjust your risk tolerance as needed to stay aligned with your goals.

Remember, investing is a marathon, not a sprint. The key is to start now and keep going.

Making Investing Fundamentals Part of Your Family’s Financial Health

Investing isn’t just about money - it’s about creating a secure future for your family. Teaching your kids about money, budgeting, and investing early can set them up for success. Plus, managing your finances well reduces stress and improves overall health.

Here are some tips to integrate investing into your family’s lifestyle:

Discuss Money Openly: Share your goals and progress with your family. It builds trust and understanding.
Task each Family Member to Learn: Financial literacy is the key to changing your relationship with money. Ensure everyone understands compound interest, budgeting, credit scores, and estate planning.
Use Tools and Apps: Many apps make budgeting and investing fun and easy for all ages.
Lead by Example: Show your kids how you save and invest. They learn best by watching you.
Balance Health and Wealth: Remember, financial health supports physical and mental well-being. Prioritize both. It serves no one to build wealth and die early from poor health.

By making smart financial choices today, you’re not just building wealth - you’re building a healthier, happier family future. Generational wealth must be done together as a family. If you need more help, check out our wealth-building community at https://www.tips4living.org/ecoach.

Next Steps

Investing might seem complicated at first, but with clear steps and a bit of patience, anyone can do it. Start small, stay consistent, and watch your money grow over time. Use ChatGPT or Gemini to learn the basics and receive a detailed plan for your situation. You have an advantage that Baby Boomers didn’t have, artificial intelligence. Politicians and billionaires are hell-bent on making sure the stock market grows, so get in on the action. Remember, you have to be in it to win it. Your future self will thank you!