by NerdWallet | December 23, 2013 5:45 am
If you’re a millennial, you might think that, between student debt and credit card bills, you’ll never be able to invest. Fortunately, there’s good news. Millennials are saving more and saving earlier than their parents, despite the financial challenges they face, according to Elliot Weissbluth, CEO of HighTower Advisors, in an interview with The Daily Ticker. The next step is to leverage those savings by making smart investments. Keep these tips in mind if you have some savings that you’d like to grow into greater wealth.
According to Weissbluth, about 90% of millennials plan to handle their finances differently from their parents, whether that means dumping their family’s financial advisor or switching brokerages. Many are also choosing to manage their own investments. If this sounds like you, know that there are many brokerages available, and at least one can fit your investing style. But if you want the best possible fit, you’ll have to do some research. Look for:
And remember: You don’t have to go with a recognizable brand to get great results. Deep discount brokers can be just as good as the ones advertising on TV, and the amount they’ll save you can really add up.
Saving for retirement is critical, and smart millennials will maximize all of the options available, from IRAs to brokerage accounts, and, perhaps most importantly, 401(k)s . If your employer offers one and you can afford to participate but haven’t signed up, don’t keep putting it off. Opting in will give your retirement savings a huge boost in several ways:
Having lived through a recession, many millennials are trying to preserve their savings by keeping out of equity investments. Though young investors should have the most aggressive portfolios, including a heavy weighting of stocks, 52% of millennials surveyed indicated low confidence in the stock market, according to CNN. While you won’t lose money in a savings account, without investing it you also won’t be able to help grow that money. The younger you are, the more you’ll want to invest that money in equities because you can still afford to take the greater risk for higher reward than if you invested the money in bonds.
Risk aversion is understandable, but too much can work against you. Not only do the potential gains of investing in stocks outweigh the risks, but if you hold a diversified portfolio of stocks, bonds and other asset classes, your odds of losing much money are greatly diminished.
It’s true: Millennials are going to have a tough time reaching the same financial benchmarks that their parents did, from homeownership to retirement. Luckily, many have also learned valuable lessons about planning for the future from watching unpredictable markets. The trick for millennials is to make sure their cautious nature toward money doesn’t handicap their investments. By continuing to save and accepting some risk, millennials can make the most of the hand they’ve been dealt.
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