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Successful Investors Share: Investing Secrets I Would Tell My 25-Year-Old Self

By Barbara Eisner Bayer, Chuck Saletta, and Eric Volkman - Updated Apr 8, 2021 at 7:18PM

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If we only knew then what we know now... we'd be RICH!

Do you know that old saying that hindsight is 20/20? If we all were able to find a time machine to go back to our mid-20s and start our investing journeys all over again, we know one thing for sure -- we'd be very rich at this point in our lives!

It's great to learn from past mistakes, but if you're the one who made them, it's hard to go back to correct them. In order to guide you to investing success, three seasoned Motley Fool contributors share valuable tips of what they'd do back then if they knew what they know now. By learning their lessons, you'll be spared from repeating their mistakes and have an easier path to retirement glory.

Two young boys in suits holding cash and surrounded by money bags.

Image source: Getty Images.

Go invest, young person!

Eric Volkman: The one (open) secret I'd tell mid-20s Eric would simply be to invest. Invest now, and don't wait. I was 27 years of age when I bought my first stock (Brno Trade Fairs in the Czech Republic, in case you're curious) while working for a European investment bank.

But there was no reason to hold out that long. I'd been interested in stocks, specifically, and finance, generally, for years, and had enough of an analytical mind to identify promising investments. I was far from rich, certainly, but there were patches of disposable income here and there that could have been used to buy securities. 

Yes, Eric at 25 was still a few years away from the dot-com frenzy of the late 1990s/early 2000s, and some time after that the long-tail bull run following the financial crisis. Still, there were good stocks to be had (as there are in nearly every era, I'd say now).

In my year 25, for example, consumer goods mainstay Estee Lauder went public at $26 per share -- I could have afforded 10 or 20 shares even back in those lean days. If I'd plonked down $520 (plus trading commissions -- remember those?) for the latter amount and did my usual buy and hold, these days I'd be sitting on over $23,163. That's not bad at all for a few hundred bucks of a post-collegiate kid's what-the-heck money.

Many financial professionals caution that good investing isn't for the immature. The more seasoned and knowledgeable an investor, the better the chance they're not burning their money on a wasteful investment. There's something to that, but at the end of the day, this is knowledge that can be acquired, even by very young people, and stock picking is a skill that can be honed by practice. 

If you're of "tender age" and you've got a few dollars burning a hole in your pocket, open an account at a brokerage -- which these days can be done by a few taps on a smartphone -- and get investing! If you're sufficiently motivated and informed, there's little downside -- $520 is what some people spend every month on takeout food -- and every reason to get an "early" start.

Pile of IOU notes with HELP sign on top, next to checkbook with IOU notes on it.

Image source: Getty Images.

Avoid debt, or pay it off quickly

Barbara Eisner Bayer: When I was 25, investing was the furthest thing from my mind -- because I was too busy dealing with and accumulating debt. And owing money means not being able to invest, which deprives any 25-year-old of taking advantage of the power of compounding.

Not only did I have several college loans that I was paying back, but as an aspiring NYC singer/actress, I wasn't earning enough money to afford all the things I needed to succeed in my career, including rent, classes, headshots, clothing, lessons, and travel costs when I did score performing work. You see, I didn't want to deprive myself of anything, so I turned to the almighty credit card to buy whatever I wanted.

This led to an overwhelming debt load. And because I was spending all the money I earned, I was paying only the minimum amount on my credit cards -- which made me go further and further into debt. I was like that little hamster running around in circles in the wheel in his cage -- always working hard, but never getting anywhere.

Obviously, this debt load made sure that there was no money to invest because any money I had went to either buying things I needed or paying down debt. But even when I reduced what I owed, I generally took on more debt. It was a vicious cycle -- with emphasis on the word vicious.

It took me until my mid-30s to get rid of all debt, and that was thanks to Dickensian benefactors -- my future in-laws -- who didn't want me to start married life with such a financial burden.

I had been consistently praying that if I ever found a way to get out of debt, I promised I would never put myself in that situation again, and to this day, although I have used debt wisely via mortgages, 0% credit cards, and home equity lines of credit, I've never been in a situation where I couldn't cover it with funds in my savings account. It was just another financial tool that I could use to positively manage my financial life.

Once I became debt-free, I was able to begin my investing journey and have been fortunate to accumulate enough of a nest egg to have a happy and worry-free retirement. But if I had been able to start investing a decade earlier, my nest egg would likely be twice as much as it is today. 

If you're in debt, make a plan to get out of it. With a little discipline and perseverance, it's possible. You may not have fairy god-in-laws like I did, but you CAN get out of debt if you just put your mind to it.

Piggy bank next to jar labeled ROTH IRA

Image source: Getty Images.

Get your retirement money inside a Roth-style plan

Chuck Saletta: When I first started working full time, my employer didn't offer a Roth-style 401(k), providing only a traditional-type plan. Recognizing the importance of starting early when it came to retirement savings, I invested in the plan starting around the time I first became eligible in order to start building that all-important nest egg.

The benefits of that decision were that it enabled me to leverage compounding early in my career, and that it put my retirement savings on autopilot. The big downside, however, is that all that money -- and the growth on it -- is on track to be fully taxed as ordinary income when I withdraw it in retirement.

On top of that, since withdrawals from traditional retirement accounts are considered income, taking money out of that plan might raise my Medicare costs and subject my Social Security benefit to taxes. At some point in retirement, those additional taxes and costs may become unavoidable. Starting at age 72, required minimum distributions force money to be withdrawn from traditional retirement accounts. 

As a result of all that, if I could go back in time, I'd urge my 25-year-old self to figure out how to petition my employer to offer a Roth-style plan back then. That way, I could have started contributing to it all that much sooner, and that money would be compounding for my retirement tax-free.

Instead, I'm very grateful for the nest egg I've been able to build, but also very aware of the tax and cost implications that I'll face once I reach retirement age. A Roth-style 401(k) has since become available to me, and I'm now contributing new money there. In addition, I also expect that I'll start converting the money from my traditional-style 401(k) to my Roth IRA over time once I retire and stop drawing a paycheck.

Although that move will be taxable, it'll likely be at a lower tax rate than I'd face now, since I wouldn't have earned income pushing those conversions into an even higher tax bracket. It'll also reduce the risk of those higher Medicare costs and Social Security taxes, since Roth IRAs are not subject to required minimum distributions in the account owner's lifetime.

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