#11 - Investing 101 with Jack Farley
Aug 22, 2023
If you have no idea where to start when it comes to investing, stocks, trading, bonds, finance, or anything in between, start here.
Jack Farley is the host of the Forward Guidance podcast where he talks to the brightest minds in finance about... finance. If you know me, or when you listen to this episode, you'll know I am the furthest thing from a finance or investing expert but I'm learning, so come learn alongside me.
Jack explains these complicated concepts and terminologies in a language that makes sense to someone in their 20s, just starting out, or wanting to know more. I learned a ton in this episode and I think you will too.
Finance 101 for Guys in Their 20s: Everything You Need to Know About Investing Your First Paycheck
A complete beginner's guide to investing, from a finance expert who's recorded 250+ episodes on the topic
You just got your first job out of college. Congratulations! But now you're staring at your bank account wondering: Should I invest this money? How much should I save? What the hell is an ETF?
If finance feels like a foreign language, you're not alone. Most college economics courses are "pretty theoretical" and "light on details," as finance podcast host Jack explains. The real learning happens after graduation—and it doesn't have to be overwhelming.
Here's everything you need to know about managing money in your twenties, broken down in terms that actually make sense.
The Foundation: Spend Less Than You Earn
Before diving into stocks and bonds, understand this fundamental truth: Building wealth is like losing weight, but in reverse.
"With money and saving money and growing wealth, it's the same thing [as weight loss]," Jack explains. "You want to consume less than you spend. You want a surplus instead of a deficit."
It sounds simple because it is. Everything else in personal finance flows from this basic principle: spend less than you earn, invest the difference.
Your First Investment: Keep It Simple
For someone in their twenties with no finance background, the best investment strategy is embarrassingly simple: buy index funds.
What's an Index Fund?
Think of an index fund (technically called an ETF - Exchange Traded Fund) as a basket containing pieces of 500+ different companies. Instead of trying to pick individual winners, you own a tiny slice of the entire stock market.
Recommended starting points:
SPY ETF - Tracks the S&P 500 (largest 500 US companies)
VOO - Similar to SPY but with even lower fees
These funds charge almost nothing (around 0.08% annually) and historically return about 10% per year over long periods.
Why Index Funds Beat Individual Stock Picking
"The pros aren't even that successful at [picking individual stocks]," Jack notes. "So you probably aren't gonna be that successful at it either."
When you try to pick individual stocks, you're competing against:
Harvard MBAs working 80-hour weeks
Supercomputers processing news in milliseconds
Teams of analysts with insider industry knowledge
Your advantage as a regular investor: You can take a long-term approach without worrying about quarterly performance reviews.
How Much Should You Invest?
The honest answer: It depends on your specific situation.
But here are the key factors to consider:
Age Matters
In your 20s: Focus almost entirely on stocks (not bonds)
Why: You have 40+ years until retirement, so you can handle short-term volatility for higher long-term returns
Emergency Fund First
Before investing anything, save 3-6 months of expenses in a regular savings account. This prevents you from having to sell investments at the worst possible time.
Start Small and Consistent
Rather than investing a lump sum, consider "dollar-cost averaging"—investing the same amount every two weeks regardless of market conditions. This reduces the impact of market timing.
Understanding the Basics: Stocks vs. Bonds
Stocks: Owning a Piece of the Business
When you buy Apple stock, you own a tiny piece of Apple. If Apple grows and becomes more profitable, your investment grows with it.
Jack's Monday Afternoon Example: "If you owned equity in my Monday afternoon and I literally found $800 on the street, you would get to participate in that upside. But if you owned my bond, you don't get that upside—I just pay you back what we agreed upon."
Bonds: Lending Money for Fixed Returns
Bonds are essentially IOUs. You lend money to a company or government, and they pay you back with interest.
The Trade-off:
Stocks: Higher potential returns, higher risk
Bonds: Lower returns, more predictable income
For your twenties: Focus on stocks since you have time to weather volatility.
Interest Rates: Why They Matter to You
Interest rates affect everything from your savings account to the stock market. Here's what you need to know:
When rates are low (like 0-2%):
Savings accounts pay almost nothing
Stocks become more attractive
It's cheaper for companies to borrow and grow
When rates are high (like 4-6%):
Savings accounts pay meaningful returns
Bonds become more competitive with stocks
Companies face higher borrowing costs
Currently: We're in a higher rate environment, which means your savings account is finally paying something meaningful.
Learning from Recent Bank Failures
Should you worry about bank failures like Silicon Valley Bank?
Short answer: Not if you have less than $250,000 in any single bank.
The Federal Deposit Insurance Corporation (FDIC) protects deposits up to $250,000 per bank. Even if your bank fails, you'll get your money back quickly.
What happened to Silicon Valley Bank:
They had too much money during the pandemic
They bought long-term bonds when rates were near 0%
When the Fed raised rates to fight inflation, those bonds lost value
Tech companies (their main customers) started withdrawing money
The bank couldn't meet withdrawal demands and failed
Lesson: The banking system has protections for regular depositors, but institutions can still make bad bets.
Should You Use a Financial Advisor?
The case for going solo: If you can stick to simple index fund investing through market crashes, you'll save on fees and likely do better long-term.
The case for an advisor: Most people panic during market downturns and make emotional decisions. A good advisor acts as a "financial therapist" who keeps you from selling at the bottom.
Cost: Financial advisors typically charge 0.5-1% of your portfolio annually. On a $10,000 portfolio, that's $50-100 per year.
Getting Started: Your Action Plan
1. Pick Your Platform
Popular options include:
Fidelity
Vanguard
Charles Schwab
Robinhood (for very basic investing)
2. Start with Target Date Funds
If index funds seem complicated, target date funds automatically adjust your stock/bond mix as you age. Pick one close to when you plan to retire (like "Target Date 2065").
3. Automate Everything
Set up automatic transfers from your checking account to your investment account. This removes emotion from the equation.
4. Don't Check Daily
The more you check your portfolio, the more likely you are to make emotional decisions. Monthly or quarterly check-ins are plenty.
Red Flags to Avoid
Never invest money you'll need within 5 years. The stock market can be volatile short-term, even if it trends up long-term.
Avoid "hot tips" and day trading. If it sounds too good to be true, it probably is.
Don't try to time the market. Even professionals rarely do this successfully.
Resources for Learning More
Essential Reading:
Investopedia - Great for definitions and basic concepts
Wall Street Journal - Industry standard for financial news
Bloomberg - More institutional perspective
Podcasts Worth Following:
Forward Guidance - Jack's show covering macro trends
Animal Spirits (The Compound) - Long-term investing focus
Odd Lots - Deep dives into financial topics
Key Principle:
"You want to own the market and all these recession calls... even if they are right, if you didn't get back in at the bottom, you actually were just better to buy and hold."
The Bottom Line
Investing in your twenties doesn't require a finance degree or complex strategies. Start simple, stay consistent, and let time work in your favor.
The biggest mistake isn't picking the wrong investment—it's not starting at all. Even small amounts invested consistently can grow into substantial wealth over decades thanks to compound interest.
Your twenties advantage: Time. You have 40+ years for your money to grow, which means you can take advantage of the stock market's long-term upward trend while weathering short-term volatility.
Start with index funds, automate your investments, and resist the urge to constantly tinker. Your future self will thank you.
About Guyset
This post is based on an episode from Guyset: A Guy's Guide to What Should Be Talked About - a weekly podcast for guys in their twenties navigating career decisions, money management, and life's biggest questions. New episodes drop every Tuesday.
Listen and connect:
Email: josh@guyset.com
Instagram, TikTok, YouTube: @theguyset
Website: guyset.com
Have questions about investing or personal finance? Submit them through the website or slide into the DMs.
Timestamps:
3:10 Interview begins and we talk about hosting podcasts
4:55 Jack introduces himself and talks about how he got started
7:13 We talk about networking tips
11:31 How should somebody who has no idea what to do start with their money
14:20 How to start learning about stocks
18:23 How to start investing
25:03 Tips for how to learn more
27:07 What is a bond
30:41 What are interest rates
36:16 We talk about the banking system
41:14 We talk about the Silicon Valley bank failure
47:53 We talk about Jack’s podcast Forward Guidance
49:53 Tips for following trends
51:07 We talk about Jack’s favorite interviews he’s done
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See you next Tuesday.
