Investing is one of the best ways to build wealth, yet there is still so much fear and ignorance surrounding the subject. This is especially true for Millennials, who are often defined as people born after 1980.
I can admit my own fear when it comes to investing (and I’m a Millennial) — for the longest time it just seemed like something rich people do. The stock market felt so far removed from my experience and the terms surrounding it were unclear and confusing.
So why has this aversion to investing plagued a whole a generation? You see, Millennials witnessed the aftermath of the Great Recession and saw the effects on their parents’ retirement accounts and employment status.
Our generation was told that we could be whatever we wanted when we grew up with a little hard work, and all of a sudden we were coming of age during one of the greatest recessions in recent history. All of a sudden those dreams were dashed — Millennials saw their parents struggle and felt their own struggle to find work, and pay off large student loan debt.
Why Millennials Fear Investing
It’s easy to see why we’re a little fearful — terrified even, of investing. Our experiences with the recession have us clinging to cash and keeping it where we can see it.
A recent report by UBS Wealth Management stated “Millennials hold more than half of their assets in cash (52%), with less than one-third of their assets (28%) in equities.” Many other reports have come out with similar findings — that Millennials love to hoard cash, but are skittish with investing.
I think a lot of it has to do with fear. It’s tough seeing your parents work their whole lives and lose half of their retirement money in a downturn. It can make you jaded and think, what’s the point? I’d also say there’s a severe lack of education. There were no financial education classes in all my years of education and it wasn’t talked about in my household.
We fear what we don’t know and don’t understand. So, how can Millennials who are terrified of investing learn how to get over their fears and get started with investing?
Here are 3 simple steps:
1. Learn Everything You Can
To get started, it’s important to learn everything you can about investing. Understanding something makes it easier to grasp, which makes it seem less scary. While there may be limited-to-no resources in your family or school, but luckily, we have the internet. The internet has a wealth of information that can serve you well.
Some great resources include Investopedia.com which has a whole Investing 101 module that has great information in easy-to-understand language. Also check out the investing archives section of this website.
Empower yourself with the gift of knowledge and start learning the basics. Learning about the stock market can seem like learning a different language — which it is in a way. But you can do it, it just takes some preparation and practice.
2. Leverage Technology and Convenience
Millennials are often known for their tech-savvy ways and love of social media. We practically grew up on the internet. Luckily, we now have several different online options to make investing easy.
This isn’t to say that you shouldn’t do your research and understand how things work, but these various services have taken out a lot of the leg-work when it comes to investing and made it extremely Millennial-friendly.
Betterment.com: Betterment is a hot new service that makes it easy to get started with investing. According to their website, “Betterment’s portfolio is maximally diversified, and comprises low-cost, liquid, index-tracking, exchange-traded funds, or ETFs. We use tax-efficient algorithms to automate optimal behavior and maximize your ability to grow your money.”
I’ve heard nothing but good things about Betterment (which is one of many upcoming robo-advisors) and plan to get started with them soon. What I love is that you can deposit as low as $100 a month to get started — and the best part? If you can’t do that, then your fee is a flat $3 per month.
Many online brokerages have certain minimums which can be prohibitive, but with robo-advisors investing is a lot more accessible to people who may be dealing with limited funds and just want to get started.
Acorns.com: Acorns is a mobile-based app, with a pretty brilliant idea of investing your spare change. The premise is that you have a lot of extra spare change from everyday purchases.
Let’s say you bought a cup of coffee for $2.75. With Acorns, you have the option to round up and use that extra quarter to invest with. While it may not seem like a lot, it all adds up over time and helps eliminate those big, scary feelings of dumping a bunch of money into the unknown.
3. Think Long-term No Matter What
As an investor, you need to have a thick skin and be in it for the long haul. A buy-and-hold strategy can help you with long-term gains, rather than quick wins — and that’s what building wealth is all about. Investing is the only surefire way to beat the cost of inflation.
When a downturn happens, it can be quick to bail and want to sell everything off. But the stock market does recover, eventually. Think of the stock market like a marriage. You aren’t going to bail the second you see trouble right? You work on it and stick it out for the long haul.
A long-term vision and strategy can help avoid any major losses and rash decisions. Your future self will thank you.
So if you are a Millennial, or you know of one who is terrified of investing, I empathize with you. I’m overcoming my own fears about it as we speak. But using these tips, you can get started and build wealth for a strong, financial future.
What’s another tip you have for Millennial investors? How do you approach investing and building wealth?
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Before you are ready to invest you should do some extensive research on your own about the different forms of investing. Do not count on the so called ” financial experts ” to guide you . They often advise a client as to what is in their own best interests , where they may get a higher commission. Back when I was young and naive I listened to the ” Vice President ” of a brokerage firm who promoted ” Penny Stocks ” telling me to get in on the ground floor in order to make a ” killing .” I was honored that a Vice President was advising me. He was more or less right , he made a ” killing ” and I got killed . Over a 6 to a 9 month period I bought thousands of shares of about 12 companies . After a 2 or 3 year period , EVERY one of them went down the tubes. Not one winner. As of the past 30 years I wait and buy when the market crashes .
I bought rental properties between 1983 and 1987 . Between 1983 and 1986 property prices were cheap because of the market crash . By 1987 the prices had more than doubled and I stopped buying . Two years later in 1989 the real estate market crashed once again . But since I bought CHEAP , I was a winner. The Dow Jones was about 3500 in 1993 , in 1997 it jumped to 7500 which was irrational . I sold most of my stocks but the market continues to rise until the 2000 Crash . At that point I would again start buying over the next 12 months , dirt cheap . It happened again with real estate starting in 2003 , prices went up , up , up to the point of being irrational in 2007 when it started to crash. That crash lasted until 2010 . The irrational stock market crashed in September 2008 and continued to crash until March 2009 . The great investor Warren Buffet said: ” Be fearful when others are greedy and be greedy when others are fearful. ” In short Buy Low , sell High
I am now sitting on cash and waiting for the next market CRASH , quite possibly this year .