Feb 22, 2017 08:50 AM EST
5 Important Investing Tips For Millennials
Millennial or not, all of us are subject to financial anxiety brought about by worrying what the future might bring. If you invest your money wisely, you will be able to have a more secure financial future. However, many millennials are still afraid of investing their money. Here are 5 important investing tips to help you overcome that anxiety and make your money work for you.
You don't need to spend hundreds of dollars to teach yourself the basics of investing. There are many resources online which can help you how to get you started. Some of the best sites where you can learn a lot about investing are Khan Academy, NerdWallet, and Morningstar. More so, there are also online tools or stock market simulators, such as the Investopedia Stock Simulator, where you can practice.
Take some risks
Investing is also about risk-taking. It can be pretty scary but the potential reward is great. Once you learn the ropes, you'll gain more confidence as well as insight on which stocks to invest in and which ones should you avoid. Sure, there is a possibility you could lose your money but in the long term, the gains are much greater than the losses.
According to a study by Vanguard, a portfolio made up of 100 percent stocks was able to have a 10.1 percent return between 1926 and 2015. That means is you invested $2500 for 50 years with a 10.1 percent return, you'll have around $307,000.
Invest on index funds
Allocate at least 70 percent of your retirement portfolio to stocks. It doesn't mean that you place all your money investing on Apple stocks but rather, go for exchange-traded funds and low-cost index.
Diversifying your investments is a good move. To do this choose one company that has emerging-market companies and one that has international companies under them.
Put a limit to your fees
Index funds have fees that can reduce your profits. You can limit the fees by avoiding unnecessary trading and choosing funds that are commission-free or no transaction fees. If the expense ratio of an index fund is at .25 percent or more, choose another which is lower than that.
Choose a Roth 401(k) or a Roth IRA
You might be thinking that you cannot get any benefit at present when you choose either of the two. So why would you choose a Roth IRA or a Roth 401(k)? By choosing them, you save yourself the burden of paying taxes in the future. Check out if your employer is offering those options. Furthermore, you can check the value of your Roth IRA or 401(k) by using a Roth calculator.
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