Millennials: 3 keys to investing

by Jonathan G. Cameron, CFP. ®

You’re looking to get your feet wet. A recent article in Time Magazine stated that Millennials are projected to inherit $30 million from baby boomers over the next 30 years[1]. While the stock market has been volatile, it continues to rise and break new highs. The questions for Millennials are, “When is the right time to invest? Where do I start?”

Here are three keys to get you started:

1. We always tell our clients, “You cannot time markets.” This is very important. Waiting for the right time to buy and/or sell is the realm of day traders. In other words, if you think you’ll get ahead by picking the right day to start investing, chances are there will always be a better day to “go in” or you will miss out on positive returns and buy later at a higher price. What’s the alternative?

2. Make a plan and stick with it. Start by automatically putting away a set amount every month, even if it’s very small, and be consistent. This is called Dollar Cost Averaging. You’d be surprised how far $100 per month goes when invested appropriately and investment earnings grow over time. Investments can be volatile, but if you’re in it for the long haul the key is to be consistent even when the market has a “correction” and prices go down. Markets are going to do what they do – you just need to stay the course.

3. Ask yourself, “What are my plans for this money and when will I need it?” Answering this will determine what kind of account(s) you open and what investments you choose. For example, if this money is intended to buy a home, travel abroad, or buy a car, then you don’t want to put this in an Individual Retirement Account (IRA) because there are penalties for withdrawals before age 59 1/2. You’re better off opening up a savings account at the bank. If you really want to invest these funds for short term (i.e. non-retirement) goals, you can open an individual account in your name so that you have access to funds without a penalty. However, you don’t want to be aggressive with these funds and run the risk of selling your investments at a loss when you need the money.

These are good starting points. Do your own research to see what makes sense for you. If you decide to find a financial planner to get started and keep you accountable, make sure he or she is board certified. Or just contact us.

For more information on what to keep in mind as you begin an investment plan as a young professional visit: http://cameron-downing.com/young-professionals.

[1] http://business.time.com/2013/02/13/boomers-never-got-their-30-trillion-inheritance-will-millennials/

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