Things to avoid if you are a ‘Millennial’ Investor
“I made my first investment at age eleven. I was wasting my life up until then.” – Warren Buffett
If you’re a member of the millennial generation, you will be agreeing with the fact that saving up or earning from a single job isn’t just enough in today’s world to lead a better lifestyle.
You may have a student loan debt to pay off or you may have put yourself a major milestone of buying a home. So what’s the way out? Well in order to add few more zeroes to your income, you may take the road of second income. You can start up a side business, take up freelancing projects or you can simply convert your hobbies into another source of income. But the key for millennials to set themselves up for future financial success unlocks in the world of investment. Investing can be considered the single most effective way to start building wealth and get rich.Now, while taking charge of money early, you can find yourself facing some unique challenges but with market knowledge and awareness you can overcome each one of them. Here are few missteps that you need to avoid if you are a millennial investor.
Avoid Being Skeptical of Investment: Get comfortable with it
The stock market crash few years back left many millennials with fears of investing. Lack of investing knowledge and distrust in money market can make you less confident. But if you are just starting out, think seriously about investing because it will have a long-lasting impact on your bottom line for decades to come.
You can approach any bank for investment counselling. In the beginning you can put your money in a couple of stock index funds. Index funds invest in a list of stocks, which lets you diversify. The plus point is that the annual fees for index funds tend to be lower than those for actively managed funds because index funds aren’t actively managed – that is, the fund manager doesn’t spend lots of time and effort scouting around for which stocks to buy and which to ditch.
Avoid Being Afraid Of Taking Risks: No pain, no gain
Best experiences happen when you put yourself in uncomfortable positions, when you take risks. If you are going to build an investing strategy that is conservative in nature, you may lose out on opportunities that can fetch you more than you desired. Don’t lag behind in developing a taste for risk.
When it comes to developing an investment strategy, a slow and steady approach may speak to your comfort level but it’s not going to generate huge returns. For that you should develop a more aggressive strategy. By not being willing to kick your risk tolerance up a notch, you could be losing out on thousands of rupees down the line in terms of unrealized returns.
Avoid Doing Bulk Investment: Set up automatic contributions
When you plan for big purchases like car, house or even expensive gadgets, setting up monthly, quarterly or semi-annual investments into a savings account can keep your plan on track.The trick is to automatically save a certain amount of your pay check every month – say you transfer 25 percent directly into your savings account.
You can even take help of multiple accounts to take care of your long and short term goals. For instance if you are planning to purchase a car within couple of years, you know exactly how much you need at the end. In that case it is advisable to take up a monthly investment plan/systematic investment plan. But if you are planning for a retirement fund, then opting for an annual investment plan is a good idea.
Avoid Overlooking Insurance Needs: Stay secured, always
The other important thing that millennials need to think about is life insurance. It’s easy for young people to feel invincible when it comes to health, or to ignore the possibility of a medical emergency. You must be thinking, you are young and healthy, so what could possibly happen that would make life insurance necessary? This invincibility complex can cost you way too much, as medical bills are the biggest cause of personal bankruptcy.
For example you own a home, are marriedor you have debts that you don’t want to leave behind for someone else and in the middle of all this something happens that you didn’t plan for at all. Then aren’t you putting yourself and your family in danger? That’s why it’s important to plan for the worst, as an unanticipated emergency could turn your life upside down instantaneously. Life insurance is a must regardless of your age and if your employer doesn’t provide it, you can search for an appropriate policy online or you can even get in touch with an agent.
Hope this article was of some help to you. So, avoid these costly mistakes as you set yourself up for future financial success!