The Millennial’s Guide to Investing

 By Valentine Ollawa

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So maybe you’re in your twenty’s or thirty’s and you might have been intimidated by the idea of investing your money due to a myriad of reasons, such as you don’t have enough money to invest, you don’t know how to invest, you don’t know what to invest in, how to pick portfolios, and so on. We all need to invest our finances for the future, and knowing the best, simpler ways to begin investing could help you gain better confidence in managing your finances for the long term. We’ve scoured the web to compile all of the best resources known, in order to create our millennial’s guide to investing.

Myth #1: I don’t have the money to invest.

Most people are stuck in the idea that in order to invest money in the stock market, one needs to have thousands of dollars saved up just to begin investing, thereby they conclude that they do not have any money to invest. When you tally up how often you visit coffee shops to get your daily kick of caffeine or how much you spend at happy hour bars weekly, that cost could easily round up to about $50 per week, or more. Through the course of one year, that amount would become $2600.

 

Fund-manager_1901254bMyth #2: Investing is just too complex and complicated.

Thankfully technology has become more accessible in the palm of our hands, so if you have a smartphone, we have broken down some of the best new apps that will help you invest your spare change as easy as pushing a button to call an Uber.

Now here are a few smart ways to invest your “coffee and happy-hour” money into investments that would grow large over time.

(Disclaimer: This does not constitute a recommendation to buy or sell any listed security or fund. We are NOT financial advisors, so you should consult a financial advisor before altering your finances, or conduct your own research)

1. Purchasing Stocks Directly From a Company

DRIPS-dividend reinvestment plans and Direct Stock Purchasing programs, allow you to invest small amounts of money into dividend-paying stock, by purchasing directly from the company. Many companies allow you to make regular purchases of very small amounts of stock, and reinvest the dividends, while avoiding brokerage commissions and fees. Such companies like Verizon, Exxon Mobile, and Coca-cola are just a few to name. Here’s a list of companies that provides no-fee DRIP programsand the minimum amount to invest, as low as $10, WOW!.

2. Investing in Mutual Funds

Mutual Funds are great options for new investors looking for a relatively less risky way to invest their money in small amounts, with a consistent return on investment, yearly. Mutual funds are, by definition, diversified, meaning they are made up a lot of different investments in stocks, bonds, or other assets covering diverse industries globally. In addition to the asset diversification, mutual funds also provide liquidity, economies of scale and are professionally managed. You can start investing in mutual funds for as low as $25 monthly, but before you invest in mutual funds make sure to perform an in-depth research on the funds that fits your investment goals, their yearly returns, etc. Here are some mutual funds you can invest in for under $100 and here and here.

3. 401k

If you have a job that offers 401k, this should be your best starting point to investing. They can be easier to understand, and your employer takes care of most of the paperwork and even makes direct contributions for you via salary deferral. You get an instant tax break, and your dividends, interest and capital gains accumulate tax-free until you take distributions in retirement, that’s if you do not touch your retirement fund. Most employers also offer matching contributions to their employees dollar-for-dollar, generally around 3% to 6% of your salary contributions. This is extra free money you would put towards your retirement, so it is best you take advantage of it and maximize your 401k.

4. Technology Apps That Helps You Invest

Since we are in a technology age and with the increase in popularity of mobile phones and apps that optimizes our daily lives, technology is breaking the barriers of traditional investing and making it more accessible to millennials. Here are some apps that aims to help entry-level investors get into the market and invest for future.

A. iBillionaire Index – If you find yourself stuck on what companies or funds to invest your money into, this app makes that easier for you by tracking the activity of billionaire investors who are chosen for both their proven ability to perform well in the market long-term and also their status as industry thought leaders. The app provides a constant stream of information about their investments, and tells you what these billionaire finance gurus are investing in so that you can piggy-back on their investments. The app also has it’s own ETF (IBLN), which tracks the billionaire index and allows anyone with at least $25 to invest.

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B. Acorn – Is a mobile app that lets you connect your debit or credit cards, along with a checking account, and then every purchase you make on those cards gets rounded up to the next dollar, and the app invests the difference for you into low-cost ETFs. You can deposit as little as $5 in recurring frequency of per day/week/month, and no matter how much you invest, you can use the app to estimate how much your money will grow in future years, which makes this a very valuable tool.The app costs $1 a month, and 0.25% to 0.5% of your investment annually and you can estimate how much you’ll pay in fees on the site.

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C. Robinhood App – This app makes investing in stock market very simple, and very cost effective. Once you find a company you like, simply tap Buy, specify the number of shares you want, and you’re done, the app lets users buy stocks without paying a commission, which typically costs the individual investors between $7 to $10 per trade. Users don’t even have to maintain a minimum account balance, which is a common requirement of other stock brokerage services.

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So save those Christmas dollars you’ll be receiving from the grandparents and family members this holiday and kickstart your investing for 2015. We hope that this article provides a good enough baseline guide to dipping your feet into the idea of investing for your future and increases your curiosity to do your own research in learning how you can best invest your money to fit your individual needs.

Want to learn more about investments, here are some sites to provide more information:

Seeking AlphaThe Motley FoolInvestopedia, to name a few.



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