Delyanne Barros got a late start with investing. She was 37 years old before she knew a thing about index funds or the power of compound interest.
“I mean, I started contributing to a 401(k) when I was 28, but I thought it was a savings account,” she says. “I did not understand that it had anything to do with the stock market.”
It wasn’t until she was a decade into her career as an employment lawyer that Barros, burdened with student loans and locked out of New York’s competitive housing market, began researching other ways to build wealth.
“In the minority community, we’ve been told for so long that owning a home is the way to build wealth,” said Barros, who was born in Brazil and came to the US at age eight. “I just started thinking: ‘There’s got to be another way, right?’”
She went down a personal finance “rabbit hole” and discovered investing is not as complicated or intimidating as she had imagined it to be.
“It was mind-blowing,” Barros recalls. “I didn’t know that you could manage your own investments. I learned that there was a pathway to retiring early, which was great for me because I was completely miserable as an attorney.”
Now 43, Barros has earned enough money from investing – and teaching her 600,000 followers to do the same – that she’s paid off her loans and retired both herself and her mother from full-time work. They moved to a beachfront condo in Portugal three years ago.
“It’s been a lifelong dream to reunite with my mother,” says Barros. Her mother returned to Brazil in 2005 and, Barros said, would not have been able to get a visa to return to the US. “We’d been apart for 20 years living on different continents.”
Barros, a champion of low-cost, slow-and-steady index fund investing, wants other late-to-game investors to know it’s never too late to start. “For a lot of people, most of their earning power is between the ages of 35 and 55,” she says. “You can make up for lost time.”
The Guardian caught up with Barros to talk about managing the anxiety of investing, moving to Portugal and her “boring as hell” advice for beginners.
You didn’t learn about investing until you were 37 years old. What was the catalyst?
What happened is I was chasing real estate for many years in New York City, and things kept falling through. At that point I was making $180,000 a year as an attorney editor for Thomson Reuters and I had $150,000 in student loans. I was frustrated. I thought I was never going to be able to build wealth. In the minority community, we’ve been told for so long that owning a home is the way to build wealth. I just started thinking: “There’s got to be another way, right?”
So I went down the rabbit hole, and for six months straight I did nothing but consume personal finance content. It helped when I found other women and people of color talking about money. When you only see white men talking about these things, you’re like, “That’s not my world. These are not my people.” You feel like an outsider.
I started sharing my journey on Instagram. There’s this thing called an IRA! There’s this thing called a brokerage account! People started asking me for help getting started with investing. Then Covid hit, everyone was at home, and it was the perfect storm for educating myself and others.
What were your first steps in building your investment portfolio?
I started maxing out my 401(k) in 2019. I had $100,000 saved to buy a place, but once I abandoned the real estate idea, I dumped $40,000 into a brokerage account. Three months later, we had the [Covid-19 stock market] crash, but I had researched and prepared myself. I was able to just ride that through and have faith that the market was going to come back. And I kept investing. In fact, I started dumping even more money into the market.
If you want to retire early, a brokerage account [one you can withdraw from before the usual retirement age without a tax penalty] is going to give you more flexibility. If you have no plans of retiring early, then you might prioritize traditional retirement accounts.
What does your investment portfolio look like now?
I keep my money very, very simple. I have 85% of my investments in S&P 500 and international index funds and 15% in individual stocks.
I have $526,000 in my retirement accounts, including a 401(k) and traditional IRA. If I don’t add any more between now and the time I’m 59½ [the age at which penalty-free withdrawals are allowed], I’ll have about $2.6m in those accounts. To see where that number comes from, use a compound interest calculator. Plug in how much you have invested, how much you plan to invest per month and how many years ahead you want to project. For your interest rate, put in 8% [a conservative average of stock market growth over time].
If somebody comes to you and is like, “I can get you a 20% return per year,” your BS meter should be going off, knowing that with the S&P 500 you can make 8% or 10% a year on average.
For my brokerage, I have over $1.5m. I’m planning to start pulling from that pretty soon. Its job is to get me to 59½, and cover my mom too. I’m sticking to a 4% withdrawal rate, or about $60,000 per year. That amount covers most of my expenses. Anything additional would come from my business.
Can you explain, once and for all, the difference between an IRA and Roth IRA?
The traditional IRA is pre-tax. The money is coming in pre-tax, it grows tax-free, and you pay taxes when you withdraw. With the Roth, you pay your taxes upfront, and then you grow the money tax-free and you withdraw tax-free. Which one’s better? It all comes down to your tax bracket. Where do you think your income is going? If you think your income is at its highest right now – if this is the most money you’re probably going to make in your career – then it makes sense to reduce your taxable income now with a traditional IRA. But if you’re just starting out and you’re going to make more money in the future, then it makes more sense to go Roth and lock in that low tax bracket now.
You didn’t get intentional about investing until you were 37. What’s the cost, in financial terms, of getting a late start?
There is a totally valid argument to be made that investing $500 a month in your 20s is going to be really detrimental to your life versus investing $1,500 a month in your 40s and 50s, when you’re more financially secure.
But know that if you start in your 40s or 50s and you want to retire in your 60s, you’ll have to invest two to three times more money per month than if you were in your 20s. I know people in their 40s and 50s who are investing thousands of dollars a month because they’re making up for lost time, and they’re fine with that.
Some experts argue that people with credit card debt and no savings should not be investing, even in a 401(k) to get the employer match.
A lot of people are living paycheck to paycheck, and investing is not a solution to an income problem. The first step is to create space so that you have additional income you can afford to live without.
However, I believe you should start investing as soon as possible, even if it literally means with $1, just to start getting used to the platform and so you can automate some things. People don’t even understand the initial steps of opening an account, setting up the automatic transfers, or how to actually purchase an index fund. So if it just gets you to that point, you’re already 20 steps ahead of most people. You’ll be ready when the money comes.
The hard line I would have is this: if you’re struggling with spending, and you’re still piling more debt on your credit cards, then let’s focus on stopping the leakage. But if you have your spending under control and a minimum of three months’ expenses saved, start investing.
You moved to Portugal three years ago, in part because, as you wrote, the “political climate was shifting in a way that really scared” you. Do you still invest in US stocks? What do you say to people hesitant to invest in the US because of their values or concerns about the direction of its economy?
I understand the motivation behind it. You’re tested during volatiles times. This is where the challenge of investing comes: looking at the news and feeling all that anxiety and dread. Your money is going to be attached to that.
The problem is that I haven’t found many funds that perform as well as the S&P 500 that don’t charge an exorbitant fee. The reason why index fund investing works is because it’s low-cost, it’s diversified and it’s got 100 years of history behind it.
It doesn’t have to be all or nothing. Maybe you put 20% of your money into an ethical fund [also known as an ESG] that doesn’t include tobacco or guns or oil. But you’re going to have to do your research, because there’s a lot of greenwashing.
I’ve always told everybody you should invest globally, but it’s almost impossible to divest from the US, and I don’t necessarily recommend it. It’s been the most powerful stock market for 50 or 75 years.
What’s the best thing you’ve spent money on?
My dog Oliver. He’s a street dog, a Basenji-Shiba mix from Thailand. He’s my buddy. However, I made the mistake of not getting pet insurance, and he got in a huge car accident and had to have surgery and it cost $10,000. If you’re going to get a pet, get pet insurance on day one.
You’ve been successful as a money coach, generating $3.5m in revenue in five years from your online course alone. What can everyday investors learn from you?
For most of my career, I was just plugging away into my 401(k), paying off debt and living below my means. The work I did in those years, before my business started, is taking care of my retirement from age 60 onward. Everything that’s happened in the last five years is gravy.
Slow and steady works. It’s not sexy. It’s boring as hell watching your account inch up. But one day, you’re gonna hit $100,000 in your investment account and you’re gonna notice the needle start to move.