Earning money and putting it into a savings account — or just leaving it idle — is not enough to achieve your long-term financial goals. That’s why you should consider investing your money in ways that will beat inflation and increase your returns over time.
When it comes to investments, millennials are more likely to take risks than boomers. Also, they prioritize convenience and online investments that are easy to understand. However, high-risk investments are not necessarily ideal since they don’t always guarantee a high return.
So, which are the best investment options for millennials? Let’s take a look.
The Best Investment Options for Millennials
If you’re a millennial who wants to keep a balanced investment portfolio, there are different options to consider. These include CFD trading, real estate, mutual funds, ETFs, and using investment apps.
One of the best investment options for millennials is CFD trading — CFD stands for ‘contract for difference’. It is a type of derivative that allows investors to trade price movements of financial markets like shares, foreign exchange, and commodities. The financial contract is based on the difference in prices between opening and closing trades of an asset.
The contract is created between a trader and an investment bank or firm. CFD trading is popular among traders, and the investor will not own the underlying asset. Instead, they are investing in the price movements associated with the asset. As a millennial, it’s an easy way to invest without having to own the assets.
Mutual Funds and ETFs
Mutual funds or ETFs (exchange-traded funds) are investment funds that put money from different investors together and use these funds to invest in different assets. All the investors can profit from the same investment. ETFs and mutual funds allow investors to get exposure to different assets and markets, making them similar.
Both assets are professionally managed. Trading ETFs is like stocks, and they are bought and sold on the stock exchange. They also experience price changes throughout the day. On the other hand, mutual fund orders are traded once a day, and the price remains the same for the entire day.
A hugely popular investment option for millennials is real estate. Investing in property allows investors to receive rental income and gain from the property’s appreciation, making it a long-term investment option. Owning real estate offers the opportunity to earn passive income, and all they have to do is maintain the property for renters.
It also provides a stable cash flow in the form of rent, and the government offers different tax advantages for real estate investors. Plus, it’s a good way to diversify your income and portfolio. One of the best types of real estate is commercial properties, as they come with higher income potential, lower vacancy rates, and longer leases.
Millennials have access to a wide range of investment options, especially online. Most millennials go for wealth-building apps, and this has become a popular trend. These apps help you manage your investment portfolio from one place, as they come with different investment options. You can set your investment goals when signing up on the app, and then the service will help in balancing your portfolio.
Some of the best investment apps that you can consider include Acorns and Chime. You can sign up for these apps, benefit from their educational services, and start making your investments on your mobile device.
Stocks and Bonds
The time-tested and trusted form of investment is stocks and bonds. These forms of investment are reliable and ideal for millennials who don’t want to take a lot of risks. Stocks allow you to buy shares in a company so you can benefit from the growth of the company. As for bonds, these are loans to governments or companies that are paid back with monthly payments.
If you’re a millennial who wants to start your investment journey, you can consider investing in stocks and bonds. They offer long-term returns, and both will allow you to diversify your portfolio. They are low-risk investments with attractive yields.
The Basics of Investing for Millennials
Before you start investing in any of the options mentioned earlier in the article, there are some factors to consider.
Set a Budget
The first thing you should do is set a budget for your investment. It’s important to plan properly by separating your income, expenses, savings, and investment funds. If you can understand where your money goes monthly, you can increase your savings and set aside money for investments.
Every investment comes with risks, so you should keep this in mind before putting your money in. Most people shy away from investments due to risk, but instead, you should employ strategies to mitigate the risk. One of the best ways to reduce risk is to diversify.
Keep an Emergency Fund
Don’t pour all your money into investments, but instead, keep an emergency fund. The emergency fund should cover about six months’ worth of expenses in case you have an emergency. This way, you don’t have to touch your investments.
Millennials can take advantage of the digital age by staying informed of their investments. Make use of news and investment tips online and stay focused on your financial goals. Also, don’t make impulsive decisions, but educate yourself first.
Compound Your Investments
Compounding is one of the best ways to grow your investments. This involves reinvesting your investment returns, and this would increase your returns over time.
Consider using the best investment options for millennials if you want to increase your wealth and achieve your long-term financial goals. Millennials can take advantage of the digital age to build wealth and secure their future. Before you get started, educate yourself and consider working with a professional.