Nearly 80 percent of millennials aren’t investing, according to a 2016 Harris poll. But refusing to take your place on Wall Street means missed opportunities to improve your financial picture significantly over the long-run.
Millennials are rightfully hesitant about putting their money into the stock market. We’ve seen two market bubbles burst in our lifetimes, both of which triggered merciless recessions that devastated many of our families. Although the economy recovered, we now have record-setting levels of student loan debt and increasingly bleak job prospects.
But investing can be helpful. For example, investing in your early 20s will lead to a much more lucrative retirement and, yes, you should be planning for that now. Market earnings compound, which means that postponing by just a few years could result in six-figure losses.
According to USA Today, large-company stocks have generated compound annual returns of 10 percent since 1926 . And that’s despite the many U.S. recessions over the last century. So if you invested $10,000 in those stocks at age 25, you would have more than $450,000 by retirement age. If, however, you waited until age 35 to make that investment, you would have a bit less than $175,000.
But saving for retirement isn’t quite that simple for millennials. College students, in particular, don’t typically have access to employer-sponsored 401(k)s, which match your contributions up to a certain amount, and they may not be ready to set up an IRA, or individual retirement account.
Even so, we now have access to a multitude of investment options that are simple, accessible and cheap. Smartphone applications, such as Stash and Acorns, allow us to invest in the market without the minimum investments and service fees required by traditional brokerages.
I began investing last year with Acorns because it’s free to those with a university email address. The company does an exceptional job of explaining everything you need to know about the service and your portfolio in simplistic terms.
For a brief explanation, Acorns invests your money in seven Exchange-Traded Funds, an investment fund traded on stock exchanges, allocated according to your risk tolerance, which include small-company, large-company, emerging market, international large-company and real estate stocks, as well as government and corporate bonds.
Personally, I like to more actively manage my investments. For this, I use Robinhood. They’re a brokerage firm, like Scottrade or E-Trade, except they operate exclusively through a smartphone app. Because of this, it’s completely free and has no minimum requirement.
Unlike Acorns, which does all the leg work for you, Robinhood allows you to choose which stocks to buy and sell. And although this requires some research, the rewards are well worth the extra work.
There are a lot of free resources available online, such as blogs and video tutorials, to help you get acquainted with the market. I know it’s intimidating, but the effort you put in now to understanding your financial options will be the best investment you can possibly make.
So open an account and invest as little or as much as you can. While investing small may not return enormous profits, you’ll make more money than had you simply kept the money in a savings account or, God forbid, spent it.
Plus, the vitality of the market depends on maintaining a consistent stream of investors. If our generation doesn’t invest as much as our predecessors, we’ll suffer the consequences.
So do us all a favor. Invest.
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