- Chloé Daniels got serious about investing in 2020 and started maxing out her 401(k) plan.
- Over the past 2.5 years, she’s built a net worth of over $200,000, thanks to “lazy” investing.
- The “lazy way” of investing involves automatically and consistently contributing to index funds.
When Chloé Daniels started collecting a paycheck for the first time, she didn’t know how to best manage it.
“The idea of investing terrified me,” she told Insider. “I always thought, ‘Investing is for smart people. It’s for people who know what they’re doing. That’s not for me.'”
She started contributing to her company’s 401(k) plan in 2015, but she had no idea what she was investing in.
“I didn’t know what a 401(k) was, and so when they gave me the sheet of paper that asked you to select your investments, I went to the CEO and I said, ‘What did you pick?'” said Daniels. “He told me what his financial adviser told him, and I thought, ‘Sure, that looks good. I’ll just do the exact same thing.’ I was 23 years old asking a guy in his 50s what he was investing in.”
Chances are, the portfolio he was investing in was more conservative, since he was closer to retirement, and not the right fit for Daniels. Still, she invested in that particular fund for about five years. She contributed 3% of her paycheck, enough to get the company match.
It wasn’t until 2020, after Daniels had spent hours reading up on personal finance, when she decided to double down on investing.
“Up until 2020, I didn’t know anything about my 401(k) or what it was invested in,” said Daniels, who had spent the past two years mostly focused on paying down her $67,000 worth of student loans. “Finally, in January 2020, I had gotten my loans down to below $30,000 and my interest rate from 8% down to 3.54%, so I was like, ‘It’s time. You’ve got to start investing.’ And so I started, not really knowing what I was doing, but I just kept learning and making changes as I went.”
At the time, Daniels was living in Chicago and had spent years working her way up the corporate ladder. She was earning six-figures as a senior communications manager at an engineering firm, she said.
Daniels started contributing about 25% of her paycheck to her 401(k), enough to max it out. (The IRS sets a 401(k) contribution limit every year. In 2022, employees cannot contribute more than $20,500.) Plus, she started picking her own funds.
She also opened a Roth IRA, another retirement-specific savings account, and maxed that out as well, she said.
Today, about two and a half years after she started maxing out both accounts, she has $127,000 in retirement savings, according to documents viewed by Insider. She quit her corporate job in October 2021 to run her personal finance coaching business, which started as a side hustle, full-time.
She also has about $10,000 invested in a brokerage account and health savings account (HSA), and a little over $1,000 in crypto. She has $40,000 in cash and $52,000 invested in a private money lending deal, putting her total assets at about $229,000. She still owes $20,000 in student loans, meaning heris about $209,000.
Daniels invests “the lazy way,” she said — meaning, she has a percentage of her income automatically lifted from her paycheck and checking account each month and redirected towards her investing accounts.
“We already have so many things going on in our lives. Most people I know have side hustles, some people are working two jobs, have kids, have partners — the last thing we need is a complicated system for our money,” said Daniels, who earned her certified financial planning (CFP) certificate in 2021. “Most of us need an easy and effective investing strategy.”
That strategy isinvesting, she added.
An index fund is essentially a basket of stocks that represents a broad market. For example, the S&P 500 holds 500 industry-leading US companies, so when you invest in this particular index fund, you’re buying a small piece of companies like Apple, Microsoft, and Amazon. The broad diversification eliminates the risk of huge losses from single stocks. These types of funds also tend to have low management fees since they’re passively managed.
“The lazy method doesn’t require you to pay attention to what the stock market is doing every day, and it is actually more effective than actively managed mutual funds,” said Daniels. “It’s not about trying to time the market. Instead, you want to spend time in the market.”
Currently, about 90% of her portfolio is in index funds, including an S&P 500, small-cap, mid-cap, and international fund, she said. And she doesn’t plan on changing her investing strategy anytime soon.
It’s not about trying to time the market. Instead, you want to spend time in the market.Chloé Daniels
She wants new investors to understand that “you don’t have to know all of the stuff that’s out there about finance to be successful. You can fall into this huge rabbit hole of trying to learn everything there is to learn about investing and, if you’re into that, cool — but most people aren’t. Most people just want a simple system where they know they’re doing the right thing, they’re not paying a ton of fees to do it, it’s going to work, and they’re going to be able to retire. That system is index-fund investing.”