There are nearly 76 million millennials living in the US right now. Out of those 76,000,000 young people, Google logs 587 searches per month for “investment tips for millennials”.
587/76,000,000 = .000772%
Written another way, that’s 1 in every 130,000 people in our generation showing a monthly interest in investing. Clearly, we aren’t too concerned with starting to save at this point in our lives.
(Yes, I know there are other search terms people use, but the idea is still the same. Young people just aren’t interested in this stuff).
So why are millennials so bad at looking at the big picture?
A. Don’t understand how much investing can truly change our lives
B. Are too distracted by the here and now
I think it’s a combination of both.
We’ve grown up in a world of Snapchat, 6 second Vines, and one-liner memes on Instagram.
The A.D.D. frenzied consumption of media is all we know; we move from fad to fad, viral video to viral video, and we never stop to realize that 99% of what we look at is a complete waste of time.
So when the topic of investing comes up (and how millennials should save for retirement), it’s doomed to fall on deaf ears.
But you know what? That’s not an excuse.
At the end of the day, we’re responsible for the outcome of our own lives.
We can choose to spend all day on Twitter and binge watch Stranger Things, or we can take the time to learn a few skills that will set us up for success for the rest of our lives.
If you want to break the one percent, then you need to take investing seriously.
I get it. It’s not a priority for you right now.
But you need to make it one.
Alright, so there are two big mental barriers that a lot of millennials face when it comes to investing, but they’re actually pretty easy to get past.
1) You think you don’t have enough money to start investing
False. That might have been true a decade ago, but not today. Like I just said, many investment services don’t have account minimums. So quit kidding yourself — if you have even 5 bucks, you can get started.
You also want to get the ball rolling with your investments now, while you still have a ton of control over your cash flow. Once you have a family, kids, a mortgage, etc., the game changes. Big time. With some discipline and planning, you can actually save a lot more than you think.
2) You have no idea what you’re doing
I think this is a huge flaw in our K-12 education system — there’s almost zero focus on personal finance. Up until now, you’ve probably never really had to think about grown-up stuff like this, so figuring out how to invest in your twenties and thirties can feel overwhelming.
There’s good news though: with today’s technology and the right guide to investing, it’s actually easier than ever for anyone to get started (even for someone with no experience).
4 Investment Tips for Millennials to Retire a Millionaire
One of the best investment ideas for beginners is to keep it simple — you only need a couple of funds (ETFs is what they are called, short for Exchange Traded Fund) to build a solid portfolio.
So without further ado, I’d like to share my 4 top investment tips for millennials.
1. Start investing early in life
It won’t always be that way. The power of compounding becomes much stronger the longer you can let your money work for you.
Consider this: If you start saving $100 a month at 25 years old (just $1,200 a year) for 40 years, you’ll have contributed $48,000, but you’ll have over $196,000 by the time you’re 65, assuming a 6% annual return.
Investing is awesome.
However, let’s say you waited ten years and didn’t start saving until you were 35 years old.
Keeping everything else exactly the same, you’d end up with only $94,800. Barely half of what you would have had before.
That’s why I’m pushing you so hard to get started now. Time is money — literally.
2. Investment apps and automation are your best friend
Regular contributions are the key to really blowing up your account (the good kind of “blowing up”).
That’s why one of my favorite investment tips for millennials is to set up an automatic bank draft each month that goes straight to your brokerage account(s).
By automating your savings, you won’t be tempted to spend that extra money each month on stuff you don’t need since the money just goes straight to your investments.
If you don’t make it automatic, it becomes easy to just skip a month or two (or three).
If you have a 401(k) at work, make sure you are contributing the maximum for each pay period that your employer will match. This is basically free money for you, so don’t pass it up!
3. Keep your fees low
Step 1 showed you the power of compound interest. Unfortunately, it also works just as potently in the opposite direction. I’m talking about fees.
Assuming you’ll be building your portfolio using ETFs (I don’t recommend buying individual stocks until you are much more familiar with the ins and outs of investing), you’ll be paying a small annual fee for each of those funds. This isn’t a bad thing, as long as you keep yourself in check.
You are likely best off using low-cost index funds that mirror the stock market (for example, an S&P 500 index fund). This also takes away your excuse of not being a stock market wizard.
Index funds are a great way for beginners to invest; they have extremely low fees which have made them quite popular among both new and experienced investors.
As a general rule of thumb, you should try to invest in funds that have annual expense ratios under 0.50%. There are plenty of funds that are even under 0.20% per year. If you’re paying any more than 0.5%, you’re being ripped off.
Don’t get ripped off.
4. Be aggressive
While you’re in your twenties (and even into your thirties), you want to be more aggressive with your investing.
In order to achieve higher returns, oftentimes you have to take on more risk with your investments. Remember, stock prices fluctuate every day with the market, some more than others.
Because you have time on your side, learning how to invest in your 20s allows you to take a more aggressive approach with your investments in hopes of locking in higher returns.
This means favoring stocks over bonds and buying companies that have higher growth potential (and more risk). If you choose to be conservative while you’re young, you risk losing out on market gains and compromising your long-term savings and retirement goals.
Investing Early Sets the Stage for a Baller Retirement
And maybe even before then, if you do it right.
Letting your money work for you while you are busy crushing it at your career or your own business (the best path to true life-changing wealth), is so important.
As millennials, time is the most valuable asset that we have. And investing is one of the most effective ways to leverage both your time and your money. Do it.
I want to challenge you to be proactive and take steps starting today to get your finances in order and open up that investment account. Even if you only start with a hundred bucks, generating just a tiny bit of momentum is key.
Do you have any investment tips for millennials? Drop us a comment below!