Millennials have inherited an interesting place in this world. Those born in the 80s through to the late 90s are a highly educated and diverse generation. And, despite many going through formal education, most believe that devoting the next three decades of their life to a company is not in the cards for them.
Unlike generations before, people of this age group have grown up with the internet and technology. Often referred to as Digital Natives, Millennials are familiar with mobile working, getting news online and communicating through text. Given their constant online access, as many as 89% of them check work-related content after regular hours.
Due to corporate life not being an attractive option, for various reasons ranging from business practices to politics, many have chosen to adopt various streams of revenue, each with varying degrees of reliability even though the average millennial is carrying around $36,000 in debt and puts 34% of their monthly income towards paying it down.
Even though Millennials have been acclaimed as entrepreneurs, many have spurned the idea of investing, citing fears of a repeat of the 2008 housing crash. With fears of another recession on the horizon, they have decided to keep their wealth in cash.
While any form of investment has an inherent risk, many Millennials haven’t considered the risk of leaving their funds in the bank and seeing inflation devour their purchasing power. Inflation currently has an average increase of 3% a year, and the days are gone where a bank would offer a CD (Certificate of Deposit) of 5%, as they are currently offering a little more than 2%.
As the prices of goods compared to salaries increase, the purchasing power people once had is slowly falling. When Millennials attempt to utilise the funds held in their savings account, they’ll soon see that it doesn’t stretch as far as when they first deposited.
As Millennials continue taking over the role as the main workforce, despite the fact that many don’t see a long-term career with a company, many companies no longer have certain positions open, having turned to freelancers and embracing the remote worker community.
This has been one of the contributing factors to constraints of investing for this growing generation. With diminishing stable income streams and the lingering doubts surrounding the capital markets, many Millennials have been left investment shy and extremely risk averse.
Even though millennials have been raised in a digital world, many have overlooked the benefits of instant transmissions when concerning the capital markets.
As stated previously, many have left their wealth in the form of cash, not realising that inflation will take its cut. Those that have broken into the investment world still apply their risk averse attitude. While managing risk is a crucial step in investing, this has led to many adopting an extremely conservative trading style.
Investors trading with a conservative system may eschew from using leverage, which can help mitigate the risk of major losses, but this may be learned behavior from older investors that are in a system of wealth protection.
While trading Forex and CFDs using leverage is a riskier investment option and has the potential to significantly increase losses, it also provides the chance to gain the highest returns.
While it’s best to diversify your portfolio, a retirement plan (if you are not one of the 41% of Millennials that don’t have access to employer sponsored retirement plans) or annuities is not going to be able to perform nearly as well as if you devote the time you currently have into learning and managing an FX/CFD account.
If Millennials take the time to get into the markets before they hit middle age, many will have the chance to build a substantial portfolio. They have the time to learn the pitfalls of emotional investing, as well as the time to develop different styles of risk management.
The ability to recover from an investment mistake in your mid-20’s or early-30’s is vastly superior to taking a hit in your 40’s as your children are entering college. Investing now as a millennial can prep you for making a portfolio leading to early retirement.
As highlighted above, Millennials should look to now, in terms of starting an investment portfolio. With virtual knowledge at their fingertips, Millennials now have the time and the means to keep up-to-date with the financial world.
As companies keep expanding their online platforms, Millennial investors now have real-time access to information, which was all but unknown to previous generations.
Financial education is readily available with the click of a button, mobile apps allow traders to perform technical analysis, and trades can be opened, closed, with limits and stops adjusted, all from their phones.
With the chances for them to pull from Social Security dwindling, it is becoming more crucial for Millennials to begin an investment portfolio and it is best to start off with a goal.
Many Millennials want their goal to be an early retirement, however, before this younger generation can start saving up for a retirement party at 60, they need to know where they currently stand. In order to do this, they need to total up their accumulated debt (everything from rent, student loans, food, to credit card bills), after this they are left with their potential investing power in order to secure an early retirement.
After a goal has been set, the level of risk and the type of investments pursued needs to be decided on. Will time be devoted to learning how to manage and maximise leverage in a FX/CFD market for a potentially early retirement? Or will the goal be to take a conservative route and hedge against risk while also pushing back their retirement date?