Investment Strategies for Millennials – Building Wealth Early

Compounding early investments from saving or even birthday money into a lifetime of regular, consistent contributions that grow larger over time is a lesson in financial independence and discipline.

But the double-whammy of high debt levels and income volatility can easily derail investing efforts, at least until millennials can adapt by setting long-term goals, and get an education on new investment vehicles and economic trends.

Invest in Your Future

You cannot build wealth without investing. Many of your long-term financial obligations, such as buying a house or sending children to college or retiring with money in the bank, all demand some form of investing. One easy first step is setting up a dedicated savings account and setting money aside for investment every month, then one day investing it. You might opt to invest in mutual funds or exchange-traded funds (ETFs) – low-cost investments with broadly diversified portfolios. Millennials more than other generations pick stocks in energy, real estate and healthcare – a more diversified portfolio than other generations, so millennials might be more comfortable with technology and use robo-advisors and mobile investment apps more than other groups. Millennials’ high levels of student loan debt can make saving enormously difficult; their variable income also creates issues for saving. Paying off debt and setting aside an emergency fund can free up income for savings and investments.

Diversify Your Portfolio

Whether you have long-term goals – like retirement, college tuition or down payments – you’ll be able to approach your financial goals more fully if you get in the habit of investing something every time you get paid. Obviously, two things will determine the kind of investments you should have. What’s your time horizon? Do you have a stomach for risk? Longer term investments such as stocks (common stocks, not preferred stocks) may be a good choice since they can have greater returns with a long enough time horizon, even if they fluctuate more than other investments. Because by investing in a diverse range of assets, you minimise the damage that negative performances by any one of your asset classes could inflict upon your portfolio. Diversification is a major reason why it’s imperative to have investments that contain a healthy mix of better-growth and less risky assets to enjoy over the long term. The increasing financial challenges to the millennial generation aside, they have a trio of other advantages that are distinct from the boomers. First, it is now easy to use technology, compared with that harrowing scene of the 401k salesman drilling bagels in 1996. Second, all the magic of compounding returns has another 40 years to work in their favour – which is a 2 per cent ‘tax cut’ that only the technology-embracers can avail themselves of. The point and purpose of good money strategies is to remove the barriers to mountain-moving success that only starving parents and salesmen who drill bagels are experienced in. If youth could dial down their ambition or their voracity a few notches, it would help. Unfortunately, prosperity isn’t found where you go looking for it but where your energy and talents intersect. As Lewis Carroll wrote in Alice’s Adventures in Wonderland, you’re on the right track if you ‘still arrive there’. Don Jagoda has been writing about money management since 1981. Here, he advises his children about using technology and services scheduled for release in the next decade.

Invest in Mutual Funds

For the first time, financial services can be just a few swipes, clicks or taps away. Millennials have grown up in and with a largely digital space, and are used to investing through robo-advisors and apps as well as peer-to-peer exchange platforms (while, for the most part, traditional bricks-and-mortar banks are out of bounds owing to high levels of student debt and COVID-19 issues). Yet investing is one of the most essential ways to achieve longer-term financial goals. So the sooner you start investing, the better, because, as the saying goes, ‘Compounding turns pennies into dollars, dollars into pounds, and eventually pounds into finely tuned instruments of destruction.’ And because of compounding, an original investment with interest and dividends compounded over decades will far outpace simply tucking your money in a savings account, or stashing it under your mattress. After you establish tax-advantaged retirement vehicles such as Roth IRAs and employer sponsored 401(k) accounts and build up an emergency fund of three to six months of expenses, use any extra funds to pay down any high-interest debt such as credit card bills. Then start investing.

Hire a Wealth Manager

For making money early on, you require savings and investment accumulation over a protracted period of time (taking advantage of compound interest to take years and decades to multiply wealth). Moreover, high returns can quicken this process while a properly diversified portfolio might reduce risk. An asset that generates a recurring income, such as rental real estate, could also pave the way to enjoy the fruit of your labour year after year, on top of capital appreciation over the long-term. Moreover, owning these (shovel-ready) assets may be a way to protect yourself from inflationary increases in prices for goods and services that – historically – impact costs the most. High level of debt and instability of stock exchanging market have prevented many millennials off investing their money, but should not turn away their backs to investing, especially they have not been embracing other methods of investment. To start investing early, make use of technology, diversify portfolios, allocate main savings in retirement saving account, maintain long term goals are some useful strategies millennials should utilize to thrive in today’s financial environment. To find out more you can reach and get a consultation from wealth manager.