What Every Millennial Should Know Going into Investing
Note from the Editor: This is a special Guest Post from Tiffany Knight, a millennial fan of JJJ Investing Services who has some valuable thoughts to share for our younger readers.
In our post “Millennials: Learn How To Invest or Prepare for Poverty”, we talked about how important it is for Millennials to begin investing as soon as possible. The problem is they often don’t know where to start.
It’s easy to see why that's the case: For many of us, money discussions are foreign concepts, and we rarely talk about our finances at home. According to an article by The New York Times, parents do not discuss money with their kids for a myriad of reasons. These reasons include:
- the belief that children are not watching how their parents spend money,
- money causes anxiety and talking about it will make said anxiety worse,
- no one ever talked about money with them so there’s no reason to start now, and lastly,
- the family doesn’t come from generational wealth so there’s no need to talk about money.
In addition to this, a chief financial analyst from Bankrate, Greg McBride, also noted how the investment collapses that happened during the early 2000s such as the Asian Financial crisis and the dot com crash understandably scared many out of stocks altogether.
All these factors and more make talking about money, and by extension, investing, more intimidating than it should be. Fortunately, as with most things in life, Millennials can overcome this simply by learning more about investments.
Here are some of the things every Millennial should know before going into investing:
Trends that will rule the future
We are now living in a world where virtually everything is related to technology one way or another. Financial markets are no exception. This reality makes it incredibly important for Millennial investors to think about the trends that will significantly influence — if not rule — the future of investments.
In a discussion of “2020 Cryptocurrency Trends You Need to Know”, Daniel Ling explores how the price of Bitcoin is expected to grow by 200% over the next two years. With cryptocurrency trading now becoming a huge market, it seems these predictions are coming to fruition.
Similarly, with the world now slowly becoming more aware of different environmental issues and turning to alternative energy, Environmental, Social and Governance (ESG) investing or sustainable investing — investments that seek positive returns and long-term impacts on society, environment and the performance of businesses — are expected to surge following the pandemic and the rampant social injustices plaguing the world.
Value of investing young
A lot of people think that in order to yield great returns, one must invest a significant amount of money right from the get-go. However, Robert Farrington emphasized in an article on Forbes that maximizing compound interest is far more important than the amount of money you are planning to invest or save. Meaning to say, it is more important to invest even small amounts of money early on than to invest a large sum later. This is because investing young will allow you to earn interest on your contributions and on the interest accumulated by your contributions.
Another benefit to investing young is benefitting from your greater risk tolerance. People who are younger have more years of earning and growth in front of them. This allows you to take more financial risks and build aggressive portfolios.
Short term options are available
Although investing and saving up for retirement is the ideal course of action for many Millennials out there, the constantly increasing cost of living may make some of them lean more towards options that can benefit them sooner.
Fortunately, such options that can help one cover major expenses such as home, car or education are available. Tim Lemke in his article “How Millennials Can Invest $10,000” noted how there are treasury bonds, broad index funds, mutual funds and peer-to-peer lending that can serve as a great source of passive income for Millennials who are looking for short-term options.
In Conclusion
The past few decades may be peppered with a few investments collapses here and there, but they have far from nullified the long-term benefits of smart investing. As such, investing remains relevant for Millennials, no matter how intimidating it can get.
Written by Tiffany Knight for jjjinvesting.com
Editor: Thank you Tiffany for this valuable insight as a Millennial. We hope many people take heed of your advice. If any of them want to talk with Jeff Weber about how they can have a personal mentor to coach them on their investing journey, please learn more ABOUT US.