Millennials are unsurprisingly the most technically advanced, computer literate, and information supplemented generation. That should make you feel hugely empowered, because you are. However wildly equipped and highly educated, are we as a generation missing a major opportunity? According to a survey conducted by Bankrate, only 26% of young people under 30-years-old are investing in stocks. That’s compared to 58% of Baby Boomers. With stocks three times what they were in 2009, why aren’t Millennials investing?
Millennials are more likely than other generations to avoid risk. They hold 52% of their savings in cash and only 28% in stocks, according to a UBS study. For other generations, the percentages are almost opposite: 23% in cash and 46% in stocks. A 2013 Accenture report found that 43% of Millennials identify as conservative investors, while only true for 27% of Gen Xers and 31% of Boomers. Additionally, in a MFS Investment Management study, 43% said they would never be comfortable investing in the stock market.
Why invest the hard earned amounts of money you have, when you could potentially lose it all?
It makes sense right? What if that wasn’t the best possible way to get ahead?
“The sooner you can start investing, the better you are. There’s the timing of the market – when to buy and when to sell – but the most important time in every single one of your lives is the time to start investing. Time is the most important ingredient in any financial freedom recipe. Time will determine how much money in the long run you really get to keep as well. So, the sooner you begin investing, the better off you’ll be”
- Suze Orman, Investing Guru
What’s better? Quick, fast and easy - isn’t that how we want it? You can start investing online today. And it’s not difficult.
False Fear #1: You don’t need a lot of money.
False Fear #2: You don’t need a lot of time.
False Fear #3: You don’t need to be an expert.
You need grit. You need motivation. You need balls (sorry mom). The life you want: it will never be given to you—you have to fight for it. The best fighters in the world will tell you that when he or she is in the ring, they have to be loose. They have to know their going to get hit.
What if Rocky Balboa came out to the world and said, “Fight? You mean take the risk of getting hit? Why would I do that?” No. He’s a legend, because despite knowing he was going to get hit in the face by some of the best fighters in the world, he said, “if you know what you’re worth, then go out and get what you’re worth, but you gotta be willing to take the hit.”
However, It’s always important to have good defense.
1) Have a cash cushion or emergency fund for unforeseen expenses.
“A good rule of thumb is to always have six months’ salary in savings,” says Charles Rotblut, vice president of the American Association of Individual Investors.
2) Check on what sorts of retirement accounts are offered at work.
If your employer offers to match your contributions to a 401(k), make sure to contribute enough to receive the maximum.
1) About 10 minutes to open your new account: Ameritrade E-TRADE Scottrade
2) A Social Security Number or Individual Taxpayer Identification Number
3) Name, address, and phone number (US CITIZEN)
4) A Beneficiary's Social Security Number, address and date of birth (IRAs Only)
5) $100 minimum if you open with a checking account at Schwab, $1,000 at E-Trade, $100 at Ameritrade, $500 at Scott Trade, and $25 at Merril Edge.
1. Get Comfortable
If you’re completely brand-new to investing, feel it out a little. Get some basic books, and make a ritual to read before bed. It’s incredibly fulfilling to learn a new trade.
Also, educate yourself with the multitude of online resources available. You will learn quicker than you think. PJ Wallin, a certified financial planner with Atlas Financial, says to know: "what is a stock, what is a bond, what is an investment allocation, what’s a mutual fund, and what’s an ETF.” This is a great place to start.
2. Stay Loyal to your Squad
Just like our boy Drake so wisely notes, “the grass ain’t always greener on the other side, it’s greener where you water it.” Great investments take time. We need to take into consideration time frames, or “investment horizons” and how they effect our returns.
“Academic study after study has shown that passive beats active because of the costs associated,” says Steve Juetten, owner of Juetten Personal Financial Planning. “Especially for a young investor who may not have as much to invest to start with, every dollar that can be invested and compound for the investor now is even more valuable.”
Here’s an example:
The S&P 500 is a collection of 500 of the most widely held stocks. There were only four ten-year periods between 1926 and 2011 where the S&P 500, as a whole, produced a loss. For holding periods of fifteen years or more, there were no losses. If you bought and held these stocks over the long term, you would have made money.
By contrast, holding the S&P 500 for only a single year would have produced a loss 24 times in the 88-year period between 1926 and 2014. Over a short period, stocks are incredibly turbulent. As a result, investing for short time periods is riskier than investing for longer time periods.
3. Time is of an Essence
Primarily due to China’s economic slowdown and fears over climbing interest rates, our economy is on an upward recovery path: the time to invest is now. Millennials, I’m assuming we eventually want to ditch our beloved roomie, and buy a home (love you girl, but peace— I want a pool).
The US average sales price for a new home on July 31, 2015 was $361,600. That means that the 20% down payment you would most likely need is $72,320. If you invested $160 a week for 7 years and that compounded annually at 7%, according to Bankrate’s calculator, before taxes, you would earn $74,542. If you increased the return to 8% and did the same $160 a week, but for 30 years, you hit $1,000,000 mark. MAMA I’VE MADE IT AND LEAVING THE HOUSE!
4. Invest in what you know
Makes sense, right? If you’re applying for a job, you usually look for something you’re good at— something you know about. Investing is not dissimilar. This isn’t a new idea; however, no less powerful. Peter Lynch taught this and it assisted Fidelity’s Magellan Fund from 1977 to 1990, during which time the Funds’ assets grew from $20 million to $14 billion.
Comparison to other people in regards to stock success can be detrimental. Your individual strengths will serve you far better than someone else’s. Just like they teach new drivers as a way to avoid head on collisions, “look ahead only in your lane.”
This should be a personal passion project— challenge yourself into entering the front line of an industry you love. Interested in renewable energy? Check out companies who are changing the world with solar. Does music inspire you? Maybe look into companies that are making a difference with sound.
The news will always be there to inform you, but it’s your decision to be a part of what is informing it. Our hope is that from reading this article, you have gained both insight and inspiration towards your new investment journey.
Honored to be in your corner,
The MAX-D Team <3
