Millennials, as a part of the population that’s currently in the prime of buying power, at least they’re trying to be endured plenty of hardships regarding finance. Building wealth, especially if you do not own any generational wealth and need to start from scratch, is hard enough on its own. Constructing a stable financial future can be done by investing, and some cost-effective strategies might be utilized for fund allocation and growth. EuropeFX will name a couple of these strategies to fill you in on all the possibilities out there.
Many riveting investing strategies emerged in 2020 that can be tapped into by future millennial investors. Therefore, if you want to take a passive or active approach to invest, it doesn’t matter. The important thing is to start building a strategy that suits you; here are some options that can be utilized:
Investing with Debt
If you are in that majority of people that are in debt for numerous reasons, it might be challenging to break off a portion of your hard-earned money and point it towards saving or investing. However, by a survey done in 2020 by the Bank of America, millennials seem to increase their savings. Saving for future goals and important milestones is one way of making sure you’ll feel stable with your financial situation, something that’s being acknowledged by more millennials in the past couple of years.
Nonetheless, millennials are still trying to get out of a financial pickle called debt and competing responsibilities. The most prevalent financial troubles faced by millennials are credit card debt and student loans. On the other hand, experts believe that millennials should not miss out on the chance to try out long-term investing and eventually stock up on funds.
Despite all of this, it is advised to prioritize paying off any credit card debt before embarking on an investing journey. In contrast, in the case of student loan-related debt, you can always opt for refinancing for a lower rate. So, to conclude, debt doesn’t imply that millennials should stay away from investment opportunities, quite the contrary. However, a balanced approach is required to even out current and future demands.
Investing in individual stocks can be a quite lucrative way to accumulate funds. A good portion of your time should be spent actively monitoring profitable companies and their stocks. This could be a fairly demanding but rewarding option to partake in. The problem with individual stocks is that they are concentrated on one security, which is not the case with index funds, which we will cover later in this article. When prices of individual stocks slump, you do not have a safety net.
Due to high market volatility, stock prices are blown out of proportion and might mislead millennial enthusiast investors. If any of these enthusiasts wanted to do an in-depth analysis of the stock market patterns, the obtained knowledge would probably scare them off.
The good thing is that technology allows us to instantly gain access to all sorts of stock market information to navigate all ongoing investments with ease. Unfortunately, this accessibility has driven people away from hiring professional financial help in many cases. Nonetheless, when you get to a certain amount, it is advised to get a professional involved. So, to summarize, investing in individual stock might be a potentially wise option. Just be sure to think through your action steps carefully.
Last but not least, investing in index funds might be a viable investment option for millennials. It implies holding specific security, an exchange-traded fund, or a mutual fund that contains a bunch of securities. Their goal is to replicate the U.S. market index to match the benchmark performance.
With the democratization of investing, people were given the freedom to invest in these funds with minimal money, using an online brokerage. Additionally, index funds are low-cost, with small management fees. This is one of the reasons why cash-strapped millennials can prosper from indexing.
Millennials and their low-risk tolerance imply that they cannot afford to lose large amounts, so the safety of this option vouches for the safety of their investments. Losses are minimal, even if the market swings. So, finally, the idea is to take advantage of these indexing perks and invest on a weekly or monthly basis; also, be sure to invest diversely in index funds.