Are millennials poor investors with little focus on their futures or do they have different investment techniques in relation to what the society views as normal?
On top of budgeting, paying down debt, and saving, investing is critical. Unfortunately, investing can be a very intimidating thing. You should, however, note that it is okay to be afraid of losing money. Also, some of the richest people known made many bad investments.
The other issue, tougher than getting a quote request form, is understanding the jargon around investments. But, with time, you will realize that it isn’t tough. Here are some of the tips that will smoothen your investment journey:
- Have an emergency fund
Remember that emergencies will happen and you don’t want them derailing your investment plan. So, you should get ahead of things and set up an emergency fund.
- Cash flow and debt
First, have the details of your cash flow at your fingertips. You need a plan for this to let you how much you can afford. As you do that, pay down your debt. You should minimize and eliminate every debt in your name because having debt make you a high-risk borrower and you pay more in interest. Low interest is considered an investment gain.
You also need to answer this, what is your net worth? This is an important metric in wealth creation.
Understand the basics of investment
For your success in investment, you should set out your investment goals. Which are your short term and long term investment goals?
- How much risk can you take?
- Are you looking for an investment with variable or fixed returns?
- Have you evaluated the risk involved in relation to the returns? It is important to note that the higher the risk, the higher the return on investment.
- You should also take into account the period of the investment, the classes of assets to invest in, asset allocation, and the market trends. Don’t forget to research and ask about your asset diversification, and where your money is going to.
Most millennials understand the importance of investing, but they put it off assuming that it is early. It is never too early to invest! You need to look at investment in terms of compounding effects. Your small investment will be bigger than you imagined a few months down the line.
Don’t be picky
You shouldn’t imagine that you will be a billionaire after your first investment. You won’t. You should consider investing in an entire index in the index or mutual funds.
Keep the cost of investment low
Note that the expenses and the fees that come alongside investments can reduce your investment portfolio drastically. So, take account of the expense ratio, the front-end sales loads, and the cost of financial advice.
If you choose to pick a money-market fund, you should ensure that it has the lowest operating expenses. It should also be tax appropriate with attractive offerings, and other associated services.
Finally, you should know who you are trading against, find high-quality stocks, and always ask for advice!