Maximizing Wealth: Investment Strategies for DINKs

Like many of you, we’ve been looking for ways to maximize our wealth through different investment strategies for DINKs. Being in this position allows us to explore investment strategies that we may not otherwise be able to consider if we had dependents and higher expenses. In this post, we’ll share insights and strategies that have helped us, and can potentially guide you in making your money work smarter.

Diversification Is Key For Investing Success

When we first started investing together, we were focused on all the wrong things. We wanted to “get rich quick” and didn’t realize that diversification is key for long term investing success. Instead of developing a robust portfolio with different types of investments, we poured our money into a few stocks that we felt were poised for immense growth. In hindsight, we realize that we got lucky with some of the good stocks we picked, while others were definitely losers.

Over time, we’ve embraced the fundamentals of diversifying our portfolio. Spreading our investments across various asset classes like stocks, bonds and real estate has been our shield against market volatility. We learned that reducing the impact of a single investment’s performance on our portfolio was crucial for the long term. This mix helps cushion against market fluctuations, because usually different types of investments perform differently under similar market conditions. This meant being less concentrated in a handful of stocks, and instead utilizing different exchange traded funds (ETFs) and mutual funds.

Make The Most of Employer-Sponsored Retirement Plans

One of the first lessons we learned on our investment journey was to take full advantage of employer-sponsored retirement plans. If you have access to a 401(k) or 403(b) through your employer, your first goal should be to contribute at least enough to receive the full employer match. This is like getting free money as a retirement bonus, but not all companies offer a match, and not all companies offer a retirement plan.

If you don’t have access to a retirement plan through your work, you can still make tax advantaged contributions to an Individual Retirement Account on your own. For DINKs that are business owners and independent contractors, you can set up your own business retirement plan and really maximize your retirement contributions. In addition to saving money for your future, contributions to retirement accounts offer major tax benefits, so be sure to take advantage of these to the fullest.

Should You Invest With Index Funds and ETFs?

Yes, investing with index funds and ETFs is a smart move for your portfolio. But that doesn’t mean you should limit your investments to only using these types of vehicles. An index fund tracks a specific market index, like the S&P 500. These passive investments are typically very low cost and diversified. An ETF, or exchange traded fund, is a type of investment vehicle that may also be classified as an index fund. But not all ETFs are index funds, in fact there are many actively managed ETFs which aim to follow a specific investment theme or industry sector.

Another popular investment vehicle is a mutual fund, these have been around longer than ETFs and share many similarities. However, generally speaking Mutual Funds have higher expenses which may include things like a commission or transaction cost. But just because a particular fund is more expensive doesn’t mean it’s a better or worse choice for your portfolio. It’s important to pick funds that match your investment goals and risk appetite.

It wasn’t until experiencing our first big and quick losses in our portfolio that we began to understand the benefits of using index funds and ETFs in our portfolio. This marked a major turning point in our investment approach. At first we were only using index funds inside of our 401(k) plans, but eventually we embraced using similar funds in our personal brokerage accounts. Today there are many different types of ETFs and not all of them are passive index funds, we have also started to use several actively managed ETFs in our portfolio as well.

Getting Started With Real Estate Investing

Before we purchased our first home, we started investing in real estate by using ETFs. There are many different types of real estate funds you can invest in. Some are very diversified while others are more specific in the types of real estate it invests in. We opted for the more diversified real estate funds, also known as publicly traded real estate investment trusts, or REITs, and began utilizing them in our retirement accounts. This satisfied our desire to diversify beyond stocks and bonds in our portfolio, and eventually we saved up enough for a down payment to purchase our own home. Fortunately we got a good mortgage rate and real estate values appreciated, but for investment real estate you should be focused more on income, not just appreciation. 

Whether it’s a rental property, vacation home, or investing through a real estate fund; real estate investing can provide income and appreciate in value long term. There may also be several tax benefits available to you when investing in real estate, like depreciation, real estate related tax write-offs, pass through deductions and more. But like all investments, investing in real estate doesn’t come without risk.

Navigating the World of Stocks and Bonds

It’s important to build the core of your investment portfolio before you begin navigating the world of stocks and bonds. In hindsight, we should have waited until we began investing in individual stocks and bonds. Consider starting your portfolio using diversified ETFs and mutual funds, then over time you can add stocks and bonds. Also be sure not to invest too high of a percentage into any single stock, this was the mistake we made when we first began building our portfolio. Like most, we’d love to see our portfolio double, but we don’t want to risk losing half of it in the process.

An advantage to using stocks and bonds in your portfolio is that they aren’t subject to any operating costs like an ETF or Mutual Fund. However, you should expect more volatility when holding these investments. If going this route be cautious and approach any tips and trends from social media and online forums with a healthy amount of skepticism. Do your own diligence and approach investing in individual stocks and bonds with a focus on the long term. Eventually, when you have enough money and you’ve built out the diversified core of your portfolio, then consider adding stocks and bonds if it aligns with your overall investment goals. 

Automate Your Investments

As a DINK couple we tend to have busy schedules balancing business with pleasure. Finding ways to automate your investments and savings is key to consistently growing your portfolio. At first we were just making automatic contributions from our paycheck into our 401(k) plans. Once we had a better handle on our expenses and income, we were able to figure out how much we had left over each month. That’s when we set up automatic monthly contributions from our bank account directly into our joint investment account. This ensured consistency in our investing habits and helped us avoid the temptation to spend the leftover money in our bank account. Also our bank account was barely earning any interest, so it was a waste holding our extra savings in there.

Depending on how you set up your investment accounts you may even be able to arrange for deposits to be automatically invested according to a pre-set mix of funds you selected. As the saying goes “out of sight, out of mind”, when you automate your investing it ensures consistent savings and reduces the temptation to spend elsewhere.

Investing in Ourselves

One of the best investments we’ve made has been in our education and skills. Whether it’s professional certifications, advanced degrees, or specialized training courses, investing in ourselves has opened doors to higher-paying opportunities and even the potential to start our own business. Keep in mind, there are plenty of resources available that are free of cost, or very low cost, where you can learn all sorts of new skills online. In fact, The DINKs Life blog is an example of this. Together we learned how to build a website, best practices for structuring blog posts, and more, through completely free online courses and by talking with friends that have experience in the online world.

Review Your Portfolio

Stay on top of your investments and review your portfolio regularly. Any successful investment plan requires a watchful eye. As much as automating and simplifying your investment approach makes sense, the idea of “set it and forget it” doesn’t mean you should forget to check in and make adjustments along the way. It’s important to review and rebalance your portfolio on a regular basis. We’ve seen some pretty major ups and downs in the markets over the past several years, so rebalancing our portfolio has been essential to keeping our investments aligned with our comfort level for risk and financial goals. For example, you may be willing to take more risk with your retirement investments since it has more time to recover from a downturn, but money you set aside for near term goals, like buying real estate in two years, requires a bit more attention. Check out this post to learn more about our routine for periodic portfolio reviews and how these regular check-ins have helped us stay on track.

Your Path to Maximizing Wealth

As DINK couples, we may have more opportunity to shape our financial future, but everyone’s path to maximizing wealth is unique. Don’t be fooled into thinking that just because you don’t have child expenses means you will automatically have more left over to save. You have to develop discipline to mind how much you save and spend on a regular basis. Trust me, we have a lot of friends that earn a good living, but spend most of their income in the process. By being proactive with our savings and investment strategies, we can enjoy the financial freedoms our lifestyle affords.

We encourage you to take these insights and apply them to your own financial journey. And remember, every couple’s path is different – find the strategies that work best for you and your life goals. With the right strategies and a bit of discipline, we can significantly grow our wealth. Remember, smart tax planning and consulting with qualified accountant and financial advisor can make a world of difference. Here’s to making our money work as hard as we do!