A 30 year old who built up a net worth of more than $1 million and quit his day job says he primarily invests in 2 types of funds — and explains why he diversifies with real estate instead of bonds (2024)

The monotony of his day job inspired him to increase his income, set aside most of it, and build enough savings so that he would eventually have the freedom to quit and work for himself or pivot careers.

Between 2015 and 2021, he increased his income from $30,000 to $250,000 a year, saved up to 80% of his paycheck, and documented his financial freedom journey on social media. He quit his day job in March 2022 to build his personal finance brand, Defining Wealth, and coaching business full-time.

Between his stock-market investments and his real-estate holdings (he owns two investment properties), Wright's net worth exceeds $1 million, according to account screenshots viewed by Insider.

The 30 year old shared his investment strategy, including the types of funds he invests in and why he prefers buy-and-hold real estate.

Investing most of his stock-market money into 2 types of funds

When it comes to stock-market investing, Wright's strategy is simple: "Find great companies or groups of great companies — low-cost index funds or ETFs — and hold onto those for the long term."

Most of his stock-market money is invested in two types of funds, he told Insider: a broad US fund and a broad international fund.

"​There are a lot of different versions and brokerages that have their own spins on it," said Wright. For example, VTFAX, FSKAX, and SWTSX are Vanguard, Fidelity, and Schwab's total stock-market index funds, which are each designed to provide investors with exposure to the entire US equity market.

Similarly, major brokerage firms have funds designed to offer investors exposure to developed and emerging international economies, like VTIAX and SWISX.

Wright invests in the Vanguard S&P 500 ETF (VOO) and the Vanguard Total International Stock Index Fund ETF (VXUS).

He prefers the simplicity of owning just a couple of funds, rather than having a bunch of different ticker symbols that make up his portfolio.

"I'm a pretty big proponent of 'the three-fund portfolio,'" he said, which consists of a domestic stock-index fund, an international stock-index fund, and a bond-index fund.

He owns the first two and will eventually invest in bonds when he gets older and wants a more conservative portfolio, he explained. For now, "I don't personally invest in bonds because I'm so young and my time horizon is so far out," he said.

Note that Treasury bond yields, which are considered as risk-free returns, are quite attractive right now, especially if you have a lot of cash. For example, the yield on the 3-month bill was about 5.48% on Monday, its highest in two decades.

But for Wright, "I've made the decision that I don't necessarily need to be involved in bonds at this point. I'm more focused on long-term growth because I don't need this money right now and can get away with essentially just two funds."

As for individual stocks, Wright owns "just a few," he said. "I try to make the heavy portion of my portfolio these funds with lots of different companies and lots of different industries. But I've been a proponent of some of the bigger tech companies as far as my single stocks since I've been investing, like Amazon, Facebook, Google, and Apple."

He also invests a small portion of his money in cryptocurrency. His philosophy around investing in a volatile asset like crypto is: Only invest what you're willing to lose.

"You should be comfortable losing all that money," said Wright, who has no more than 2% of his entire portfolio in crypto.

Strategically contributing a small amount to his 401(k)

When Wright was working in sales, his company offered a 401(k). While he could afford to contribute to it, and even max it out, he barely utilized the retirement savings plan.

"I invested a small amount early on, between $5,000 and $10,000," he said. "Then, I focused almost all of my stock investing within brokerage accounts from there on out."

Wright wanted the flexibility to use his money whenever. (With retirement-specific accounts, you typically can't withdraw your funds before age 59½ without incurring a fee.) His company did not offer a match, he noted, so he wasn't missing out on so-called free money.

If your company offers a retirement plan, there are many benefits to investing in one: Your contributions are deducted automatically from your paycheck, you'll reap the benefits of compound interest and earn returns on your returns over time, and some employers offer a company match. A 401(k) is also a tax-advantaged investment vehicle — contributing to one lowers your taxable income since it's funded with pre-tax dollars and your funds grow tax-free.

However, for Wright, "the idea of holding my money there until I was 59 or older when I was trying to ideally retire before 35 just didn't make much sense to me," he said. "It's a personal question. I'm not saying using a 401(k) is wrong — I just felt like it didn't align completely with where I saw myself and what my goals were."

Diversifying his portfolio with real estate

One of the reasons Wright wanted his savings to be more accessible is so that he could eventually buy real estate, which requires upfront cash for a down payment and closing costs.

He started investing in real estate in 2018 in Orlando, Florida, where he lived at the time. The first property he bought was a primary home that he and his wife moved into. It was a $400,000 home that he financed with a conventional loan. He cashed out some of the money that he'd invested in the stock market to put 10% down, or about $40,000.

Less than half a year later, in June 2019, Wright bought his first investment property: a $145,000 triplex that he paid for in cash. Again, he used stock market money that he'd built up over the previous four years to fund the purchase.

Today, he owns seven rental units across two investment properties in Orlando. He and his wife sold their primary home in 2022 when they moved to Nashville. They're now renting, as they're not sure how long they'll be in Tennessee.

Plus, it's expensive to buy and own a home today, he said: "Prices have gone up and interest rates have gone up. When we had our house, we were paying about $2,000 a month. The people who bought it are probably paying $4,000 or more because the price went up and the interest rate doubled, so it's just a tough time to buy."

Wright is focused on growing his business but plans to eventually jump back into real estate, which he believes is an excellent long-term investment.

What Wright likes about investing in real estate is that "you're buying an asset that's producing income," he said. "With stocks, you're buying it and hoping it goes up in value so that you can sell it later. With a house, you also buy it and hope it goes up in value, but at the same time, a rental property — if you buy the correct rental property — is paying you cash flow every month that you can live off while the house still goes up in value."

Plus, "the mortgage is being paid down by tenants," he added. "And there are a lot of tax advantages."

Specifically, he prefers to buy and hold real estate.

"The opposite strategy of that is flipping, where you buy a house, fix it up, and then try to sell it for a profit," he said. "The possible good part is that you can make more money quickly but, once you sell it, it's back to the grindstone, trying to find another one."

With buy-and-hold, between rental income, appreciation, and tax benefits, "you can make money in five, six, or seven different ways," he said. That's why he doesn't plan on selling his rentals any time soon: "I'll probably hold on to those for the rest of my life."