Investing for millennials… how should it be done? According to a recent article by Yahoo Finance, a shocking 43% of millennials are not investing. By investing, meaning investing in stocks, bonds, or even real estate. Even more interesting is that 45% of those polled (25- to 34-year-olds) say they don’t have enough money to invest.
Updated December 2022
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Investing for Millennials
We know we should be investing and getting started earlier with investing, but until you actually take the plunge and start to invest, you think it’s a scary thing and it requires a lot of investing-smarts or something like that.
You can take your investing-smarts to whatever level you want to- set it and forget it index investing, or options trading and dividend paying company analysis.
Whether you are a younger millennial or an older millennial like me, here is a how to guide on investing for millennials.
Millennials are Heterogeneous
First let us define what a millennial is.
The exact years of millennialism is a little iffy, but according to Wikipedia, the age of millennials is generally between the birth years of 1981 to 1996.
That’s a pretty big age difference, a 15 year difference from the older millennials (like me) to the younger millennials. The youngest millennial today is around 23 years old (just graduated from university) whereas older millennials are almost 40 (at least late 30’s, or age 38).
That is quite heterogenous if you ask me!
The money-needs and life stage of a 23 year old compared to a mid-thirty year old is quite different. When I was 23, I was busy partying it up and traveling the world without a care in the world. I did just start investing at that time but no where near as ‘refined’ as I am with investing now. I was busy going through the 7 stages of investing at that time (***cough*** penny stocks *** cough***).
Now, well into my 30’s, with a young family, partying it up and traveling the world are far from my mind. Financial independence and finding ways to not work as much is now on my mind but it wasn’t so much on my mind in my early 20’s.
Millennials can be at a disadvantage with investing though, because many millennials have:
No Experience with a Market Crash
I was in my early 20’s when the market crash happened and it rattled my bones. Instead of viewing it as an opportunity to invest more and understanding that stocks were cheap, cheap, cheap…I got a bit scared and waited a while before jumping back in and reopening positions from stop losses that were triggered. I could have made much more money if I had stayed invested and didn’t wait on the sidelines to try and time the market.
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In March 2020 the aforementioned market crash happened, albeit for a short duration. Stocks fell fast and they fell hard, but they also rebounded just as quickly forming a V shaped recovery. No one knows what the stock market will do tomorrow, but buying great companies at a deep discount will do you very well in a few years.
In 2022, some millennials were experiencing their first bear market for the very first time.
Even though many millennials have not experienced a market crash (and are spooked off by it hence not investing their money), I think to start investing as a millennial in this day and age is actually easier than before.
Related: How Much Should I have Saved by 35?
There are even promotions like up to $2000 cash back or free trades for one year if you sign up for an online brokerage account and get a new online brokerage account promotion.
Also, index investing (for example I buy VXC in chunks and dollar cost average) has become very well known and popular, and when you get a correct asset allocation according to your risk profile you don’t have to worry as much about timing the market.
Since indexing is popular I tend to think that investing as a millennial is easier.
Not easier though, is the elephant in the millennial’s room. It is the ability to find money in your budget to save to invest since student debt and household debt or housing prices are so high. First, we need to get rid of the elephant.
Track Your Expenses, Get Out of Debt
First thing is first, to be able to have money to start investing, you have to track your expenses so you know what your cash flow situation is like. Getting out of debt would be also optimal. A lot of Canadian personal finance blogs recommend tracking your expenses.
I would not recommend starting to invest with credit card debt (because it’s such a high about, there’s very little possibility you would be able to pull a 19.99% rate of return from the markets but you could with paying off your credit card debt!). However, if you are one of the lucky Canadians who had their credit card debt wiped out by Chase bank, consider yourself good to use money to invest instead!
Start Saving Money
Since 45% of those millennials polled (25- to 34-year-olds) say they don’t have enough money to invest, there are ways to invest without too much needed in the first place.
I remember when I first started investing (with high fee mutual funds and mutual fund sales people), they told me I needed to have at least $5000 to invest. Some places don’t even look at you unless you have $100,000 to invest.
It was daunting and I felt a bit snubbed from the snobby mutual fund sales people because I didn’t have more money to invest with them.
However, “f*&#” them as I say because I don’t need them and their snobby $100K minimum investments thanks to DIY investing!
These days, investing is much easier because you can invest in moderation and dollar cost average and the ‘golden ticket’ to investing comes at a much lower price, often with no minimum investments from discount brokerages.
Even if there is a minimum investment, it isn’t as much as $5000, more like $1000.
So to save up for your first $1000 and continued investment of what you can afford in your monthly allotment, it will go a long way towards the achievement of financial independence because when you start young, you will be at a huge advantage because time really is on your side.
I won’t spend too much time talking about how to track your expenses and save money, but you can check out my save money post here, it can be easy to scrounge up $7000+ fast without having to go digging through the couch pillows.
Also pay yourself first is the easiest way to build wealth after you figure out what your bare bones budget is. To me, I think this is one of the key ways to build wealth. A set it and forget it approach, get rid of that money into a high interest savings account so you don’t see it, and don’t give the lizard brain any chance to be impulsive and spend that money.
Finally, instead of splurging let other splurge on you for your birthday with birthday freebies in Canada. You’ll be saving money to invest in no time.
Then funnel that high interest savings account money into your investment portfolio.
Take Your Pick: Robo advisor or DIY ETF and Indexing
There are three easy options for millennials to invest with a set-it-and-forget-it kind of approach:
- Get a roboadvisor to create your portfolio
- Do a DIY investment portfolio with exchange traded funds (basically be your own robo-advisor)
- Create your own indexing portfolio with TD e-series funds
Once you have your first $1000 (or even $100 since brokerages like Wealthsimple Trade do not have any investing minimums) you can start investing yourself.
If you want to learn how to build a free ETF investment portfolio here’s a step by step guide on how to get an investment TFSA with Questrade. It’s free to buy ETFs but there is a commission charged for when you sell.
You could pair DIY Questrade with something like Passiv (helps you rebalance your investments) which is free for the first year for Questrade users.
If you want to learn how to create your own investment portfolio that tracks the index, here’s how to create a TD e-series fund (and more importantly, how to rebalance it). If you want to compare the TD e-series vs ETFs check this post out.
If you want to consider using a robo-advisor to manage your money, here are the pros and cons of using a robo-advisor and some robo-advisors available in Canada.
There’s also the Tangerine Investment Funds too.
Here are some Canadian investing tips to get you started, with considerations of where to put your money (e.g. RRSP, TFSA, or non-registered) and also tax considerations to be aware of.
Alternately you could invest in dividend paying companies with some of these great ideas from dividend investing books.
Keep at It
Finally, the most important tip as a millennial beginner investor is to keep at it even with the current bear market. Even though I am expecting it I am still scared of my reaction when it happens. Losing 25-50% of your hard earned savings (and life long savings) is very scary to say the least, and it will be hard to predict how you may react to it… but keep calm and invest on.
Keep invested, continue investing regularly, and make sure you have cash on hand so you can invest more as needed when your portfolio takes a plunge.
As a millennial (especially a younger millennial) you have time on your side and more importantly, continued income and cash to deploy into your investment portfolio.
If you feel more comfortable, you might branch off and try your hand at stock picking. Liquid from Freedom 35 has become financially independent within 12 years and has outperformed the index for the past 12 years. He suggests opening up two portfolios, one for indexing and another for stock picking and see which one has higher returns. The one with higher returns should be the one that you are more well suited to.
Before you know it, you will have a nice passive income stream from dividends that your indexing portfolio generates, and you will be on your way to financial independence.
You could even diversify and invest in commercial real estate in Canada through crowdfunding.
Once you keep at it, you will start finding investing easy, and then you can open up an RESP for your baby after your TFSA.
You may also be interested in:
Are you a millennial? What has your experience been with investing for millennials?
GYM is a 40 something millennial writing about personal finance since 2009 and interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for a free dividend yield spreadsheet and the free Young Money Bootcamp PDF.