Millennials, What To Know Before You Invest

Most financial experts agree that the best time to start investing in stocks is when you’re young, have time to wait out the downturns and can take full advantage of compounding. Well that’s not new news! But where do you begin?!

A mere 26 percent of Americans under age 30 are now investing in the stock market, according to a recent survey by Bankrate.com. Compare that with 58 percent of people between ages 50 and 64 who invest.  Investing IQ

Sure, the fact that boomers are older may explain some of the difference. But age isn’t the only factor. In a recent study, millennials said that a lack of financial knowledge makes them less confident about investing. And a lack of information was the number two reason respondents of every age in the Bankrate survey gave for avoiding the market (the other was a lack of money #shocker).

So here’s some tips to consider to make the most of your money:

• Before you even open an investment account, make sure you’ve handled your debt properly.
  • Pay off your credit card debt
  • Set aside 3-6 months of expenses in an emergency fund, in case you incur unexpected expenses or a job loss
• Take full advantage of your employer sponsored retirement plans.
  • If there is a company matching contribution, we recommend contributing so as to maximize that matching contribution limit. Never leave free money on the table!
• Don’t have access to a 401(k)? There are other options. You can contribute up to $5,500 this year into an IRA.
  • In a regular IRA the contributions are tax deductible in the year of your contribution. But, you’ll be taxed on the growth and compounding at ordinary income tax rates when you start taking money out. 100% taxable.
  • A Roth IRA is funded with after tax money but all the compounding and growth on your money is 100% tax-free.

If you’re fortunate enough to have exercised those options and still have some cash left over, you can open a regular investment account. Here are a few additional thoughts to keep in mind:

The Power to Grow

• Costs reduce return. You can start with do it yourself discount brokers like Schwab or Vanguard or try an automated investment service like Betterment or Wealthfront. Should you choose to use an advisor, look for someone that will educate and empower you in the process! The value add is key.

• Low-fee passive funds can help you keep costs low and diversify. A passive mutual fund or an exchange-traded fund (ETF) gives you access to a broad range of stocks (or bonds or other assets). They mirror indexes like the Standard & Poor’s 500 and have low expense ratios. You can look up a fund’s expense ratio and historical returns through Morningstar.com or your brokerage firm.

• Don’t forget to diversify—both with your funds and within your overall portfolio. The markets go up and down, but over time the stock market has provided an average annual return of 8-10 percent.

• Invest $50 or $100 a month, you have decades to take advantage of compounding and grow your money.

As a millennial, if you focus on setting aside money to invest, diversify your investments and seek sound counsel, you can set yourself up now to retire well later! #FinancialIndependence

The information contained herein does not constitute tax or legal advice.  Any decisions or actions should not be made without first consulting a financial professional, CPA or attorney.

For more information contact us at 845.563.0537 or Contact@CompassAMG.com

The author of this blog, Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC.

Spire Wealth Management, LLC is a Federally Registered Investment Advisory Firm. Securities offered through an affiliate, Spire Securities, LLC. Member FINRA/SIPC.

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