Personal Finance

I'm 36 and have amassed $6 million through "boring" investments - why do the rich old guys I know seem to do things so differently?

John Seetoo

Published: December 11, 2024 4:53 pm

The paths towards building a large retirement nest egg are varied. The methods used to accumulate those nest eggs often dictate one’s preferences on how to manage those funds going into retirement. 

The preferences are often rooted in the industries the individuals worked in, as well as economic conditions defining security and opportunity at the time of their employment. As a result, soliciting opinions and perspectives from those outside one’s demographic is often a good way to avail oneself of different perspectives, opportunities, and strategies.

Key Points

• Reddit’s financial discussion is often an echo chamber, influenced heavily by younger, tech-oriented demographics that favor “VTI and chill” investments.
• Different industries, age groups, and economic backgrounds shape distinct wealth management strategies, suggesting the value of seeking diverse opinions when planning retirement.
• Also: Take this quiz to see if you’re on track to retire ^(Sponsored)

Avoiding the Echo Chamber on Nest Egg Management

A 36-year old Reddit poster found himself in this same situation and realized that opinion diversity seemed to be lacking on Reddit. His 401-K had ballooned of late to over $6 million, and he was hoping to realize a F.I.R.E. (Financial Independence, Retire Early) strategy. However, he found that Reddit advice responses appeared to be almost unanimously repeating the mantra, “VTI and chill”.

Vanguard Total Stock Index (NYSE: VTI) is an exchange traded index fund that tracks the total stock market and has a history of strong returns, with a 10 year, +235% ROI. The poster claims that many of the different High Net Worth people he has met in person “never even heard of VTI”, yet the majority of the Reddit responses routinely downvoted other asset classes or platforms, such as dividend stocks, real estate, or even seed capital investing. 

Reddit Demographics vs. The Real World

The demographics of Reddit itself may bear responsibility for the “VTI and chill” echo chamber.  Reddit users are often members of Millennials or Gen-Z. A sizable percentage of them work in the tech industry, so 401-Ks loaded with company stock and warrants that soar as if loaded on rocket fuel are increasing. However, the mindsets of software engineers whose F.I.R.E. goals are nearing the finish line serendipitously and with little personal sacrifice and cultivation differ radically from risk-taking entrepreneurs who bet the ranch on themselves and their own initiative. 

Those that have created their wealth in the real estate sector, like Robert Kiyosaki, Barbara Corcoran, and President Donald Trump are entrepreneurial. They have built their businesses into major successes, and are not the kind of people who would leave the bulk of their hard earned wealth for the future passively managed.

Others whose retirement nest eggs were built in industries like energy, manufacturing, or media also have different perspectives on managing their funds. Those from the Boomer or Gen-X demographics may be more inclined towards a mix of real estate or REIT, dividend stocks, or other kinds of steady, income-producing assets. Financial author and podcaster Dave Ramsey himself invests regularly in growth, growth and income, aggressive growth, and international mutual funds, which he will switch at his discretion. 

Strategies to Consider

If the poster were to heed the advice of his Reddit peers and go the “VTI and chill” route, there are still some risk mitigation strategies that he might want to commence:

• Having the bulk of the 401-K composed of company stock and warrants is a literal “all the eggs in one basket” scenario that could have drastic consequences if the stock were to collapse. Beginning a strategy of selling into the upward trend, or at least a covered call protocol would take some money off the table, which can go into VTI or some other investments without triggering capital gains events.
• Starting a Roth 401-K to dispense with taxes early on can allow subsequent remaining assets to grow without capital gains concerns in the future. 
• Diversification into a small allocation of REITs or other income producing assets is something that might not be of interest for a 36-year old, but may become crucially important 30 years from now. Some early exposure to such assets, albeit on a smaller scale, can be beneficial for near term cash liquidity and asset class reference familiarity.