Wealth Management Tips for Millennials
A lot of millennials are finding themselves in a spiral of debt because of poor financial choices. If you are one of them, know that you don’t have to be stuck in that hole forever. By simply changing your spending habits and educating yourself about money management you can turn things around and even grow your savings.
The best thing about being a millennial is that time is still on your side. Know, however, that this won’t be the case forever so it’s best to get started today. With that in mind now is the time to develop a new approach to your finances and cultivate the mindset of investing.
Here are some essential wealth management tips to get you started.
Learning the Basics of Investing
As excited as you are to start your investing journey, hold up for a minute and ask yourself, “Do I know enough about what I’m putting my hard-earned money in?” Investing in something you don’t know about will get you nowhere, so make sure you learn more about it first.
With millennials being tech-savvy and into almost anything involving the Internet and apps, why don’t you begin your financial education online? A great place to start is by downloading the Robinhood app and start reading their Investing 101 guilde. Alternatively you can dip your toes in the investing world using a roboadvisor and grow your knowledge along with your investments.
Invest For the Future But Also Set Short Term Goals
It’s wise to start with investment options that are likely to reap good returns in the future but remember don’t get too attached to any one investment. When it seems like some of your investments aren’t working for you, be ready to let them go. This is especially true for stock investments where you can use tax loss harvesting to reduce your taxes.
Put your money into something that has the great potential to grow over time. Real estate, for example, is an excellent way to begin if you have the capital needed for a downpayment.
Also, you may be playing for the long term here, but it won’t hurt to set up short-term investments as well. These are beneficial especially if you want to build up funds to start a business or other future investment.
Diversify Your Investment Portfolio
A wise investor knows how vital diversification is in successful wealth management. While investing is a risk by nature, focusing all your funds in one asset can have serious financial implications should your choice of investment fail.
When you spread your funds around different companies or industries, then a single decline won’t have a substantial effect on your entire portfolio. Suffice to say; diversification is one of the best and most effective ways to secure your investment.
Keep the Momentum Going – REINVEST!
Here’s another critical piece of advice: reinvest! When you finally make money from one of your investments, don’t spend it just yet. Instead, make a habit of reinvesting to take advantage of compound growth.
When you leverage sustained growth, you may witness your initial investment experience extraordinary gains over a period of time.
Don’t Be Afraid of Risks
There’s a certain amount of risk involved in everything that we do, and even more so when it comes to investing. While risks are often viewed negatively, in the world of wealth and asset management, they are an opportunity for substantial gains. As the saying goes, “The greater the risk, the greater the reward.” Now that doens’t mean gambling with your investment money is a good idea. You need to take calculated risks, not frivolous ones.
On the other end of the spectrum many people prefer safer investment options like bonds and bank savings account. Although these are sound investments, they have relatively lower returns compared to stocks and mutual funds. This is where you should take advantage of your youth and mix in more investments that have higher potential gains compared to older investors who need to err on the side of caution to avoid potential losses.
This brings us back to diversification. Add a little flavor to your portfolio by taking riskier investment choices from time to time to maximize your investment upside.
The realm of stocks, bonds, and mutual funds can seem daunting for a newbie to take in. In fact, even seasoned investors sometimes find themselves overwhelmed by the sheer volume of available investment choices.
Once you have the basics down and have built up your investement funds, having a financial advisor who can offer you impartial advice can prove valuable. This is especially important when you need to consider tax implications of one investment type versus another.
Lastly, try to find a financial advisor who understands your current finances as well as your long term goals. Often times someone closer to your age is more likely to come up with investment strategies that will better fit your needs and financial situation.
The Best Time to Invest Is NOW!
If you’re not putting away a part of your income yet, then now is the time to get started. Remember: Time is money. Perhaps, the most important lesson that we have all learned from the recent recession is that we can’t put off saving and investing any longer. Y0u need to take charge of your financial future.