Millennials, also known as Generation Y or the Net Generation, are those born between the early 1980s and the early 2000s. We got the name because we were born at the turn of the millennium and had seen the boom of the internet age. We are a vaguely defined and broad group, with massive under-utilized investment potential. Here are some investing mistakes we are prone to make.
Thinking you are too broke to invest
Some Millennials are cash-strapped thanks to massive student loan debt, the effects of the Great Recession, and the lack of jobs for college graduates. Others of us believe we have too little money to invest because our priorities lie elsewhere – like with the latest gadgets from Apple or cool stuff on Amazon Prime. But whether we’re poor or believe we are, time is of the essence when it comes to investing. The earlier you invest, the more money you make. No matter your income or assets, start by putting away a little at a time on a regular schedule. You may be surprised how quickly you can make a significant investment tailored to your available capital base; don’t focus on investing mistakes.
Focusing on a retirement plan
Those who do plan for their financial future concentrate on a 401K, which is a long-term investment with relatively low returns. Although retirement funds are secure and vital, young investors can enjoy higher rates of return from investing in the stock market vis-a-vis putting money into bonds or mutual funds. Modern retirement plans have evolved to include an aspect of productive investment and earlier returns, but Millennials need to optimize their rate of return as much as possible. We need money for weddings, vacations, moves, and to help our families, not just for the distant future of our retirements.
Lack of diversification
As internet babies, we Millennials tend to believe in technology company stocks more than the traditional stocks. This fallacy is leading us to make high-reward, high-risk investments. Exchange-traded funds (ETF) are one way to minimize risk since they operate like mutual funds but trade like stocks and typically track the index. Whatever vehicles you choose, remember that diversification is the key to a successful investment strategy and will help minimize investing mistakes.
Prioritizing debt repayment
Do we even need to remind you about our crushing student loan debts? Millennials are often tempted to pay off all debts before socking money away for the future, and this is a crucial investing mistake. Smarter money would invest and use profits gained to service current loans. This strategy takes off some pressure as your money works for you and help you with investment mistakes.
Underutilization of available resources
In the current climate, there are many ways young people can invest. An investing app like Stockpile lets you buy your favorite stocks like Amazon, Apple, Google, and Facebook, but for as little as $5 or $25. Fractional shares of stock give access to stocks once thought as too expensive. Online training programs and content sites like The Ticker offer knowledge about investments for beginners. With the requisite desire, Millennials can easily venture into the stock market using their current knowledge and capital base. If you start small at Stockpile and invest a little at a time, allow the magic of compounding to take place and keep learning with The Ticker, you will find yourself in a better situation.
A positive can-do attitude and an awareness of your current financial position are vital to avoid investing mistakes. Retirement may not be as far away as it seems. Without an investment strategy, it’s guaranteed to be far away, indeed.