The millennial generation came into adulthood when the stock market was in an unsteady place, and investing might not seem like the smartest thing to do with your money when you can safely tuck it away into a savings account.
But beginning a financial portfolio as early as possible is a great way to start accumulating interest and dividends, and the best way to get ahead in your retirement fund. With the right knowledge and planning, youths can create successful portfolios and grow into veteran investors.
Start Saving for Retirement.
Investing in a 401k or an IRA is one of the best things you can do as a young person. If your employer offers a 401k, take advantage. A great feature of the 401k is that employers will match your contribution up to a certain percent. A Roth IRA is a good idea if your employer doesn’t offer a 401k. The money you put into a Roth is already taxed, so when you withdraw it later, it’s tax-free. Even if you can’t save much in your 20s, putting away a little bit is better than nothing at all because interest and employer percentage matches add up over the years.
Given the recent financial climate of the United States, buying stock might seem like a risky decision. But according to CNN, investing in stocks can average you about 10 percent annually, which is 5 percent more than you’d get from bonds. Even if you lose money, the stock market overall tends to trend upwards, Since you’re young, you have the time to stick it out and make money over the long haul.
Diversify Your Investments.
Don’t invest all your money in one place. It may be tempting to risk all your extra cash in the stock market because you have years to make it back. Or, you might decide to play it safe and leave your money in a savings account or a money market. But neither of these paths are the best idea. Diversification is important because it protects your money. Even if one area of your investments tanks, like the stock market, you’ve got money in other places. You want to spread your investments over multiple classes of assets. Don’t buy just stocks, but purchase bonds, mutual funds, money markets, and treasury notes too.
Investing isn’t all about where your money is and how much you make in dividends and interest. Knowing which financial firms are best at what they do, having a good broker, and knowing whose advice you can trust is just as important. Investing takes a lot of research and planning, and hiring the right people to help you do this is worth the money you spend for the help. To get pointed in the right direction, know the locations of upcoming Fisher Investments Events to help you get started networking with knowledgable people.
The best thing you can do is have patience and avoid getting emotional. If your investments aren’t performing the way you would like them to, or if you don’t have enough money right now to invest as much as you’d like, don’t panic. Sometimes you might be tempted to trade stocks on a whim based on trends, falling numbers, or the daily news. This is a bad idea. The best thing you can do is have a plan in place for how you deal with your investments — and stick to it. Don’t let fear or the desire for fast money cloud your judgment. If you invest wisely and remain patient, you’ll end up happy with the results over the long haul.
Even if you don’t have a lot of spare money, investing whatever you can is a good idea. A small amount will get the ball rolling with accumulating interest, and it’ll grow even more once you’re able to add significant amounts to it. By following a few simple tips, seeking out the right people, and using money wisely, young people have the potential to create portfolios that’ll see them through adult life and will provide a great retirement.