Millennials know it’s important to start investing, but where do they start? After all, investing earlier on can yield much higher returns for retirement and other financial goals. Here, we break down some things Millennials will want to consider when beginning to invest.
Millennial Investing Tips
1. Where will you invest?
Before you start investing in stocks, bonds, funds and all of the other fun things in the world; you have to find a platform in which you can do that – a brokerage account. Many brokerage accounts require a minimum deposit amount. If you are a young and spunky investor just looking to start investing – you may have to save up before you can invest. A minimum deposit could be as high as a couple thousand dollars.
2. Consider brokerage’s commission per trade
Another thing to keep in consideration is the brokerage’s commission per trade – how much they will charge every time you trade. Depending on what investment you are trading; stocks, bonds, mutual funds, Exchange Traded Funds (ETFs), options, etc. the commission per trade may vary. Buying a stock for $50 with a trade commission of $10 doesn’t make sense! The larger the purchases in your portfolio, the less effect (percentage-wise) the trade commission will have on your performance. Ask yourself what investments you plan on buying and selling. You may also need to ask yourself how often you plan on trading as well and if the frequency of trading makes sense with how much you’re being charged per trade.
3. Diversified Accounts
Diversification is a way to manage risk by investing in large variety of different types of investments such as bonds, stocks and short-term investments, etc. Small investment accounts can run the risk of not being well diversified. Theoretically, a well-diversified account can withstand market fluctuations better than an account that’s not considered diversified. If you only have a couple hundred dollars to start out, it’s going to be nearly impossible to properly diversify your portfolio by buying individual stocks. Exchange Traded Funds (ETFs) and mutual funds can help with that problem. Investing in a basic and broad ETF or mutual fund can give a small new investor some diversification with the purchase of only one fund.