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I am 25 years old software developer with no loans. Before my software developer work I rarely had more than enough money to live by and I was not thinking of savings and such since I didn't any spare money.

Now I earn 4 times minimal salary in my country which is above average. About 50% of my salary goes to expenses I can't live without (rent, taxes, bills, cash, etc.). So in theory I can save other 50% for good.

I want after 15 years to be able to have an apartment in the city I live in and apartment somewhere near the sea where I plan to work remotely the whole summer, and this is the absolute minimum if things not go well as I plan them to be.

I have thought of following scenarios:

  • In our country we have something like life insurance that is some kind of bank deposit. I deposit each month certain amount of money (decided by me) in the bank each month for a period of time (decided by me). If something happens with me (I die for instance) the money is paid back to my family, otherwise after this period I can withdraw them with no penalty tax (I can withdraw them before the period but there will be some penalty tax).

  • Put some money in hedge fund. To be honest, I don't know much about this besides that I give my money so a given hedge fund (investors) operate with them on the stock and depending on how well they operate with them I get some margin. This sounds good since I tried investing myself in stocks but this requires a lot of reading of news and politics so I quit.

  • Put my money in bank so I get some interest of them. This is option however interest rates are so low that I don't see a point.

  • Of course starting my own business is one option, but for now I am out of ideas.

In general, I'd like to have multiple income streams (currently I have only one sadly). What will be the best way to proceed?

  • Buy real estate straight away. Today. Maybe a small flat. Anything. – Fattie Jul 16 '18 at 14:47
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  1. Keep on living below your means.
  2. Don't be a miser.
  3. Build up an Emergency Fund of 3-4 months worth of living expenses. (Not just for job loss, but also if some other big expense occurs.) Put some in a savings account, and the rest in Certificates of Deposit.
  4. In America, at least, hedge funds are higher on the risk scale than "regular" index funds. There are stock and bond index funds in the EU that you might be able to invest in.
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first off, congrats. You're in a good place. Starting young to invest will make retiring or changing careers on your own terms that much easier.

By "no loans", I'm assuming you mean "no debt." If you have any debt, pay it off quickly before doing any investing.

Life insurance is not an investment. Don't ever treat it as such. Study what insurance means - it's a transfer of risk for events you don't want to pay for out of your own pocket. If you have family depending on your income, purchase life insurance. If not, stop spending money on a lousy investment vehicle. Life insurance is to provide a lump sum for family if you should pass away unexpectedly.

As for investment options, you'll have to disclose which country you're in as it greatly affects your options.

  • I live in Bulgaria – kuskmen Jul 15 '18 at 8:22
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    "You're in a good place." I disagree. OP is in an incredibly bad place: "sudden wealth". OP has already tinkered around wasting time and money on various "schemes". From this day, there are two courses for the OP (Course 1) OP will continue to tinker and gamble with schemes, asking which one is best, trying different ones etc. This will go on for 40 years until death. (Course 2) Tommorow morning (Monday) OP will buy a small flat or similar. Nothing is worse than "sudden wealth". – Fattie Jul 15 '18 at 13:53
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    @Fattie This comment seems unduly harsh and dogmatic. Note that "I rarely had more than enough money to live by and I was not thinking of savings and such" is a typical condition of college students (whether or not OP was a student). Then those students graduate and get jobs. If this is an "incredibly bad" "sudden wealth" then many, many people somehow deal with it. And as I said in another comment, there is no sign that "OP has already tinkered around wasting time and money on various 'schemes' ". OP has thought about some schemes but is being cautious and deliberate. – nanoman Jul 15 '18 at 19:58
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    @Fattie I think this is a language issue, and really OP needs to clarify what they meant. But in the context of "I have thought of following scenarios", I took the bulleted list to be hypothetical unless clearly stated otherwise. So from "Put some money in hedge fund" I understood not "I have put some money in hedge fund", but "One of the options is to put some money in hedge fund". Also, you say "huge, dramatic, step" but OP makes "4 times minimal salary in my country". 4x minimum wage in Bulgaria is EUR12,500 per year, not exactly "international programmer money". – nanoman Jul 15 '18 at 20:23
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    Some versions of life insurance are investment. Bad investments, but investments nonetheless. – Acccumulation Jul 17 '18 at 15:33
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On getting a house

Being able to remove your rent and buy property first would be great but it really depends on personal circumstances.

If you already know where you want to settle, you may want to look into securing a house now. Keep in mind that mortgages tend to be quite expensive, based on your ability to repay and the country you're in.

I suggest you to run some calculations to see how much more you would end up paying a sample property with the best mortgage you can access.

If you think you'll have clearer ideas in a few years or if the mortgage is much more expensive than paying rent for the years it would take you to cover the full amount - you can rent and be more flexible for a while, while you save money to buy property.

On getting a house: conclusions

If you end up getting a mortgage, try to get a mortgage that will let you pay early without fees and to put all your money you earn in the mortgage.

If end up saving money for a property that you'll buy in less than 5 years I suggest you to put your money in saving accounts, even if they pay less, or slightly above the inflation rate.

The reasoning is: the more rewarding the profits, the higher the risk - the higher the risk, the more volatile the investment - the more volatile the investment, the longer you would need to wait before seeing some profits.

On investing your hard earned money

After having decided how much you want to invest

Given your age and your self proclaimed time frame of 15 years, your attitude to risk should be medium-high.

I would recommend investing in an index. There is a lot to say about indexes. Summarising and simplifying a lot, they let you invest in a lot of companies from all over the world, diversifying your portfolio and therefore decreasing your risk.

More in particular I would recommend investing in a 100%/0% or 80%/20% stock/bond index fund with a global exposure(like this one). The differences between bonds and stocks are another huge topic. Summarising and simplifying a lot, Bonds are debt securities, stocks are ownership stakes.

The data we have shows that generally stocks beat bonds over long period of times (5-10 years) - even thought past performance is not indicative of future results. Some people say bonds are less risky than stocks, other people say they aren't.

The reason for recommending a index tracking the world is, again, to increase diversification and reduce the risk of some economy collapsing and damaging your portfolio.

The market will probably keep on growing for the duration of our lifetimes.

On increasing significantly your net worth

Starting your own business and generating money passively is the only way to increase significantly your net worth (unless you're lucky or your salary is measured in millions).

I would recommend against startups, unless you've the right contacts and a team with the skills to raise money round after round and sell/market your product. The statistics on startups don't look great and having to grow so quickly puts a lot of stress on people and on the business. What could have been perfectly healthy small business can burn to the ground because of that.

The possible businesses you can start are unlimited - the following are my personal thoughts on the subject, given my personal circumstances: Being in software myself, I think there is a good potential of making small passive revenue streams by building B2B small businesses. The rationale behind going B2B is that you've lower marketing and sales costs, you don't need to do many small sales but a few big ones, businesses could be less inclined to switch to a competitor (because it's a cost for them), businesses could generate a smaller amount of support requests (just because of the smaller number of people).

Best of luck

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