There are nearly 76 million millennials living in the US right now. Out of those 76,000,000 young people, Google logs just under 90k searches per month for “investing tips for millennials”.
90,000/76,000,000 = 0.118%
WTF. Clearly we aren’t too concerned with investing.
(Yes, I know there are other search terms people use, but the idea is still the exact same- young people just aren’t interested in this stuff).
So why do millennials suck so bad at looking at the big picture? We either
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.
Note: This post contains affiliate links.
If You Want to Break the One Percent, You Need to Take Investing Seriously
I get it. It’s not a priority for you right now.
You need to make it one.
I recommend starting your investing account with TradeKing. It’s extremely easy to open an account, and at $4.95 per trade and no account minimums its one of the more millennial-friendly (and trusted) investing services. With our link you can even get $100 in free trade commissions (way more than enough to get started). Seriously, just open an account and get started while you’re here- don’t put it off because we both know you’ll never get it done if you wait. Take action!
Alright, so there are two big mental barriers that a lot of millennials face when it comes to investing, but they’re actually pretty east to get past.
1) You think you don’t have enough money to get started
False. That might have been true a decade ago, but not today. Like 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.
If you’re dead-set on starting with more money, here are a few ideas to get that extra cash:
- How I Made $427 in Two Days Driving for Uber
- 11 Ways to Make an Extra $1,000 Each Month from Home
- My Interview with the Woman Who Made $43k as a Part-time Proofreader
- How We Made $1,500 in the First Month on Our Blog
2) You have no idea what the hell you are doing
I think this is a huge flaw in our K-12 education system- there’s almost zero focus on personal finance. So up until now, you’ve never really had to think about grown-up stuff like this, so figuring out how to invest in your in your twenties and thirties can be feel overwhelming.
There’s good news though: with today’s technology, it’s actually easier than ever for anyone to get started (even for someone with no experience).
I wrote a quick a little book on it, but the gist of it is to keep things 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 investing tips for millennials.
Investing Tips for Millennials: 4 Key Pieces of Advice
Step 1: Understand that time is on your side
And it won’t always be that way. The power of compounding becomes much stronger the longer you can let it your money work for you.
Consider this: If you start saving $100 bucks a month at 25 years old (just $1,200 a year) you’ll have $187,500 by the time you’re 65, assuming a 6% annual return.
Think about it this way: this result is the same as paying $100 a month for a Lamborghini. Investing is awesome.
HOWEVER, let’s say you waited ten years and didn’t start saving until 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.
Step 2: Automate everything and get out of your own way
Regular contributions are the key to really blowing up your account (the good kind of “blowing up”).
The best way to make sure you keep up with regular contributions to your investments 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 is SO 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, don’t pass it up!
Step 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. Yes, I’m talking about fees.
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. Index funds 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 .5%, you’re being ripped off.
Don’t get ripped off.
Step 4: Be Aggressive
While you’re in your twenties (and even into your thirties), you should probably be really aggressive.
In order to achieve higher returns, often times it means taking on more risk with your investments. Remembers, 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 You Being a Baller in 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.
Next Action Step:
(My Personal Recommendation for Millennials)
Do you have any investing tips for millennials? How ’bout any questions for me about getting started?
Drop me a comment below!