I'm 25 years old, and saved $80,000 in Cash, how should I invest my money if I want to retire in 10 years?
I'm a 25 year old Software Engineer in Silicon Valley. (debt free)
I have a near 100% savings rate, due to being in a rare situation where I don't have a housing payment (long story), not married etc.
I'm EXTREMELY frugal and save abut $60,000-$80,000 a year, in cash. I also work a side job 20 hours a week to get to this level and spend almost no money, only spend to basically keep me alive.
The reason I have been doing this (being so frugal) is because of how much I hate the cubicle/office job environment, and my motivation is fueled by this. (to get out of it)
The problem I am encountering is, I don't know how to invest my money despite tons of research.
I always thought making money was the hardest part, and investing it was the easiest, my current situation is making me feel like its the opposite.
I save about 70k on average per year, and I am planning to have $700,000 invested in the next 10 years, by the age of 35.
I want to make at the very least $2,500 a month in passive monthly income, by the time I'm age 35. I then plan on moving to a poor developing country where this money would stretch much further (I realize this amount of money won't retire me in the USA, as it's not nearly enough, but based on my retirement plans, it should be enough for the countries I'm looking at it.)
I have narrowed my investing options down to (2) choices, both of which present their pro's and con's (also based on my own personal situation):
Option 1:
Vanguard Index Funds (I'd like to put all my monthly paychecks into Vanguard Funds such as the Total Stock Market Index, but I'm being presented with (2) primary issues
- What happens if the market tanks? Does the 4% withdrawal rule, still apply? Let us say I am investing $70,000 a year into index funds, can I start withdrawing 4% immediately, starting the first year? Or do i have to wait for the market to appreciate, (such as waiting a few years before I can start withdrawing 4%) Can I still take 4% out each year, even if something like the Great Depression/Great Recession happens? Or do all of a sudden have to stop taking out 4% for living expenses if the market tanks?
- Do any Vanguard Total Market Index Funds allow for custom company allocation? I have religious views that prohibit the investment of funds into companies that use interest (banks), alcohol companies, weapons companies etc. Many of which are captured by the total market index. I would like to invest in something like VTSAX, but by "deselecting" certain companies, if you will, in order to meet my religious views. I know this is possible with mutual funds, but I am aiming solely for index funds because mutual fund fee's are too high and will eat into cash flow.
Option 2:
Real Estate Rental Property (Buying Single Family Homes in Cash)
Since I live in California, and can't use leverage/loans due to religious views, I am only able to buy homes in cash. My budget for a home is 80k, which you can't find in California, so I've been looking out of state, where a ton of scammers prey on California investors. Turnkey companies sell you homes that are very difficult to resell, due to these markets being only investor-purchase markets, so I could be stuck with a place I could never resell, if I need an exit strategy. I've looked at areas like Memphis, TN.
What should I do?
All I want, is to be consistently making $2,500 passive monthly income by the time I'm 35 (10 years from now) with $700,000 in capital invested.