A big thanks to Lori Smith for sharing her knowledge on investing for Millennials. It’s never too early to start making your first investment, time in the market is your best friend. Enjoy! – T$C
Investing is a risky proposition at any age. When you’re young and struggling to make ends meet, it’s even scarier. Here’s the deal, though, it doesn’t have to be. If you arm yourself with the right knowledge, discipline, and mindset, you can and will succeed.
Building wealth by investing in the stock market, provides better overall financial stability. Historically, stocks have performed better than bonds or cash. Millennials, however, are hesitant to invest. Remember, this generation came of age during one of the worst financial crisis in 2008. Not to mention they carry more student loan debt than any other generation.
Given this, Millennials, unfortunately, have one of the worst mindsets about money. When you’re young, in general, your thinking is “I’ve got time to start saving later.” This mentality is more about fear than irresponsibility. Most Millennials aren’t investing because they think they don’t have enough money. Their focus is more on avoiding loss than growing their investments for retirement.
Being young, inexperienced or even fearful doesn’t excuse you from being uninformed or lazy about your finances. Building wealth is about building your future.
In Fidelity’s Millennial Money Study, only 62% of Millennials indicated they have investment accounts. Worse, only 9% of millennials considered themselves investors. We need to change that.
Many Millennials don’t feel comfortable talking with their parents about finances. This is due to their parents fear and bad experience in the 2008 crash. Many lost big, leaving a bitter taste in their mouths to this day. Parents probably aren’t the best to get advice from.
Seeking advice from a qualified financial advisor is your best bet. Unfortunately, most don’t accommodate small balance clients with less than $50,000 in assets. But, there are some financial planning firms that work with lower-net-worth clients. There’re even some that work with Millennials in particular.
Here’s a couple you can check out:
Garrett Planning Network charges hourly fees instead of a percentage of assets. While XY Planning Network employs fee-only advisers, who actually cater to Millennials.
The key when seeking advice from anyone, is to do your due diligence. Research the firm or person you are considering seeking advice from and verify their credentials. Make sure they are either a professionally qualified advisor or someone you can trust.
Pitfalls To Avoid
Expectations of Millennials when it comes to investing are not exactly realistic. They expect higher returns in a shorter time frame more than any other generation. This is not how the stock market works. Stocks are a long term investment strategy, not a get rich fast plan.
Building wealth takes time. You have to understand that volatile stock market fluctuations are just a natural part of the game.
4 Step Investment Plan
1) Start Saving Now – Consider this, since money is the ultimate motivator, if you begin investing just $100 monthly at a rate of 6% annually – which is below the stock market’s long-term- average – this investment will yield around $185,000 by the time you reach 65, depending on the age at which you start investing. If this doesn’t motivate you, I don’t know what will.
If you keep putting off saving until you’ve paid off fill in the blank, then you ’ll never start. Student loan debt will get replaced with a car loan, then a car loan will get replaced by a mortgage. You get the idea.
2) Build A Strong Foundation – The best place to start investing for Millennials are in low-cost diversified funds. You want to aim for the four major asset classes: stocks, bonds, real estate and commodities.
Diversifying your investments will minimize your losses and create better financial stability within your portfolio.
3) Start Contributing To A Retirement Plan Now – Most employers offer some kind of retirement plan such as a 401(k). Some companies even offer to match your contributions up to a certain percentage. Hmm…. Free money. Jump on this now, if you haven’t already.
If you’re self-employed or your employer doesn’t offer this, then open your own self-directed IRA. The point is, having a retirement plan only adds to your investment assets.
4) Stay Disciplined – It’s important to have the right money mindset and form positive behaviors when it comes to saving.
Volatile markets, recessions, etc. are not the enemy. These things are out of your control. You have to adopt the right mindset and avoid allowing emotional reactions to result in counterproductive behavior. Committing to a consistent, disciplined savings plan is what will keep you from always being like your broke counterparts that are just getting by. It’s important to remember, investing is about the long term.
Tips And Tools For Investing
- Take the time to plan for your future. If you can spend the time planning, for a night out with your friends, then you can devote time to your investments. Spend at least 1 – 2 hours monthly on setting goals and tracking your investments.
- Save regularly. Putting aside a little now, only to forego saving, later on, is a sure way to sabotage your overall investment goals. An easy way to save is through automatic transfers, for both your 401(k) and investment contributions.
- Avoid turning on the autopilot switch. You need to keep on top of your investments to track results. This way you can identify any issues and address them before they become a real problem.
If you love apps, there’re plenty of legitimate tools out there to help you with investing.
- Personal Capital
- Schroder’s Income IQ Evaluation
- Rebalance IRA
Investing can be scary, but if you do it right, the rewards are exponentially worth it. If you’re not sure about going all in at first, then take small steps and educate yourself. You can always adjust your plan later once you feel more confident.
Investing for Millennials is just as important as it is for any generation, to build a strong financial future. With a little bit of effort, discipline and a change in your money mindset, you can succeed.
Fidelity’s Millennial Money Study – https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/fidelity/millennial-money-study.pdf
Author Bio – Lori Smith is a professional writer and content strategist with Write Word Studios. (writewordstudios.wixsite.com/website)
She specializes in writing opinion pieces, lifestyle articles, and in-depth blog posts about running an online business.
When did you start investing?
Is it through your work or your own IRA?