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Although it has been reported that Millennials are said to be adventurous and more open-minded than other generations, they were also found to be unwilling to think about investing and unprepared financially for their future. Instead of thinking about stocks, mutual funds and dividends, young investors aged 21 to 37 years old today prefer cash investments.
“The preference for cash and aversion to the stock market among young adults is very troubling considering this age group has the biggest retirement savings burden. They won’t get there without being willing to assume a little short-term price risk in their long-term money,” said Bankrat’s chief financial analyst Greg McBride.
In fact, Investor Field Guide said investments by older generations can easily crush the Millennial portfolio as they tend to make three big mistakes:
- They aren’t saving enough
- Their asset allocation is backward
- Their stock selection is not performing well
In this post, we want to highlight effective tips on how a Millennial can build a competitive investment portfolio.
Locate a trustworthy advisor
For first-timers who haven’t delved into the world of investment before, it’s normal to feel overwhelmed by the sheer volume of choices that are out there. Finding someone who can offer you unbiased and rational advice on the steps you need to take is important for your financial success.
While many would look to their parents or their recommended financial advisors for help, the most ideal step is to talk to someone who specializes in handling Millennials’ investment portfolios. The investment strategies of people in their 20s tend to look very different from the those in their 40s. Therefore, advisors should know how to tailor their advice to their specific situation, need, desire and most importantly demographic.
Diversify through forex trading
When it comes to building your investment portfolio, diversifying it will give one an advantage to gain more on the market. Young investors mustn’t put all their money in one company or asset, and should look at other opportunities where their money will multiply. Apparently, Millennials have many of the core traits that make forex trading a viable investment for them, such as:
- Conservative trading systems
- Risk aversion
- Variable income
- Technological knowledge
- More time
Given Millennials willingness to learn and advanced knowledge in technology, they have a distinct advantage when it comes to trading.
Never be on investment autopilot
Since technologies make it easier to handle and manage investment, Millennials believe it’s easy to build their portfolio, and can result in going in what’s termed as “tech autopilot”. However, this move will be their biggest mistake when it comes to investments, as these ‘robo-advisors’ will not be able to fully assist you in your personal financial goals.
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Although it can give you an insight on where you should be targeting, it’s best to consult a real advisor for financial advice or know more about the basics of investment management. Investors should know when to buy, sell, or hold on to their investments to maximize their money’s potential. Advisors may give the best steps to take, but it’s still on the investor’s last decision on what to do with their portfolios.
Even with a competitive portfolio, young investors also need to avoid common financial blunders to ensure their money continues to earn in the future. Given that time is on their side, Millennials must take advantage of it and invest early on in life so that they are able to gain a financial freedom by the time they retire.