The Ultimate Guide to Smart Money Investments for Millennials

Last Updated on October 17, 2021

All Investments for Millennials carry a degree of risk and it’s important not to take unnecessary risks with your money (more on this later). While there is no such thing as a ‘sure bet’, some Investments are considered better bets than others. This article aims to identify what constitutes good Investments for Millennials and how you should go about making one for yourself.

6 Factors that Determine Good Investments for Millennials

1) ROI, i.e., Return On Investment: This will usually refer to the percentage gain on your initial investment. For example, if you invested $1,000 and it yielded a return of $1,100 within the same year, your ROI would be 10%.

2) The Duration of Your Investment: This is pretty self-explanatory. For example, if you put down $10,000 and you’ll receive that money back (plus interest or dividends earned) in one month after making the initial purchase, this will not qualify as an investment because there’s too short a time frame to generate any sort of gain. On the other hand, even long-term Investments for Millennials such as CDs and treasury bonds have a predetermined duration and there’s no guarantee that they’ll yield gains over their life span.

3) Liquidity: Simply put, liquidity refers to how quickly you can turn your asset into cash. Stocks, for example, are considered highly liquid because you can sell them at any time to turn your investment into cash. Many Investments for Millennials have restrictions on withdrawal which affects liquidity. A home, for example, is not necessarily a liquid asset since it could take some time for you to actually sell the house and collect your gains.

4) Investability: This refers to how easy or difficult it is to purchase an asset in question. For example, stamp collections are usually hard to invest in unless you know what you’re doing due to their unique nature.

5) The Asset’s Market Demand: Supply and demand economics comes into play with many assets although I’ll admit that there’s more hype than substance behind this matter (in other words, this is a long-term investment but it’s difficult to predict in the short term). For example, Nvidia is currently trading at an all-time high because of its recent breakthroughs in video cards. People are buying them out left and right with the promise that they’ll be worth more in the future. The problem with this logic? It assumes that people will still want NVidia GPUs for gaming purposes years down the line which might not happen if consumers shift to other alternatives such as AMD.

6) Corporate Profitability: This relates closely to market demand since you’re basically betting on whether or not the company will continue making money off its products/services even if there is some level of demand for them. Apple, for example, has seen tremendous revenue growth in recent years which has led to widespread demand for their products. Their good fortune, however, is predicated on the fact that they continue to make money off hardware sales (iPhones, iPads, etc.). If new competitors arise with similar or even superior products at lower prices (which might happen soon), Apple’s revenue stream will take a hit and Apple stockholders will suffer as a result.

How Should I Invest My Money?

Investing in the stock market can be daunting since you have to choose between mutual funds, ETFs, stocks, bonds…the list goes on. There are people who dump all their money into one single risky investment and hope that they’re making the right choice while others are terrified by the concept of investing altogether.

The truth is that there’s no correct way of investing your money. You can always invest in mutual funds or ETFs (which essentially means that you’re pooling together with other investors for a common goal). Both options offer some level of diversity but it’s still difficult to predict what will happen to any given company due to external factors such as wars, famine, climate change, etc which could potentially devastate the economy (such as the great depression).

The best option would be to invest in a balanced portfolio since it reduces your risk level while maximizing gains. For example, if you have $2000 to invest, put $1000 into stocks and $1000 into bonds. If the economy tanks, you’ll still have half your money intact although there’s a good chance that you’ll lose some capital along the way. If everything goes well, though, you might have more than what you started with which is why maintaining a diverse investment portfolio is key to long-term wealth accumulation.

3 Things You Need To Know Before You Invest

#1 Diversify: Diversification helps to reduce the risk of anyone particular investment tanking without sacrificing too much growth potential. It can be difficult to determine what is a good or bad diversification since you’ll need to keep tabs on all your Investments for Millennials frequently. Nonetheless, this is the ideal way to invest your money since it simultaneously reduces risk while increasing gains.

#2 Don’t Time The Market: This always comes back to bite people in the rear even though it sounds like great advice at first glance. Most people who try to time the market fail miserably because they’re only looking short term instead of the long term which makes their efforts fruitless (“I cashed out just before thing turned around!”). Furthermore, trying to time the market usually costs you money in transaction fees which eat away at your profits.

#3 Don’t Chase “Hot” Stocks: Just because everyone is buying up Apple stock, doesn’t mean that it’s the right time for you to do so. It could be a great opportunity or it could be an amazing disaster if things turn south quickly (which they sometimes do). Due to the inherent volatility of the stock market, investing in companies with strong fundamentals gives you a better chance of maximizing returns instead of getting sucked into rumors going around.

What are the Different Types of Investments for Millennials?

Different types of Investments for Millennials have different ways of growing in value.

Stocks

First, we will look at stocks. A company can raise capital by selling its own stock to investors who believe that it will make a profit from buying it. The price per share goes up if many people buy it, and it goes down if few people buy it. Stock is bought with the expectation that the price per share will go up in the future because the company has a good business plan or is poised to make money through market changes such as increased demand for their products.

A stock is a security that gives the holder shares of ownership in a company. The more stocks you own, the bigger your piece of the pie. Stocks are usually classified as either “growth” or “value.” Growth companies have a high potential for growth, so they might pay out small dividends instead. Value companies tend to pay bigger dividends, but they drop in price when there are no dividends because people believe them to be less valuable than growth companies now compared with years ago. These securities are very liquid which means that they can be bought or sold at any time during market hours, but they are also more volatile because you can easily lose your initial investment if the company goes bankrupt.

Bonds

The bond market works similarly to stocks in that investors are buying pieces of paper expecting that they will pay more later than what they are paying now. However, instead of buying these pieces of paper from companies, bond buyers are buying them from countries or municipalities that need help raising capital for projects like road construction. When you invest in bonds, you are basically loaning money to another party at an interest rate. The higher your potential return, the riskier it usually is because if the borrower defaults, then you lose your money.

A bond is a loan that will pay you interest until the end of its term when it should be worth its face value. The advantage to this type of investment is that your lender can’t take away your initial investment like they could with other types of investments. They are usually issued by companies or governments and sold in large denominations (usually $1,000 or more). These securities are offered at their par value, which means you get all money back at maturity if it doesn’t default. On the other hand, however, buying individual bonds usually has lower returns because you’re not pooling together with many investors to invest in bigger projects that require huge sums of capital. It may seem intimidating to invest for retirement if you don’t know much about it, but if you try researching and reading more about mutual funds and other investment vehicles, then you will be able to understand more of what’s going on and how your money is being invested.

Mutual Funds

If you want to invest in an entire basket of stocks, one way is to purchase mutual funds. Mutual funds are like baskets that contain many different types of investments, such as stocks (both individual companies and whole stock market indexes), bonds, cash deposits, or other securities. A fund manager decides what goes into the basket based on his or her knowledge about current economic conditions. The price per share goes up if many people buy it, and it goes down if few people buy it. Over time, a basket may increase in value because the constituents have good business plans being executed well by management. If you are investing for retirement, find out how much risk you can take so that your investment portfolio will be appropriate.

Index Funds

An index fund is a type of mutual fund that tracks the components of a market index, such as the S&P 500. The advantage to this type of investment is that it usually has lower fees than actively managed funds because it doesn’t require much research or management input. Since an investor can make money by buying low and selling high, all you have to do with an index fund is buy everything in an entire basket rather than pick out specific things to buy yourself. Investing for your retirement might seem scary, but if you learn how to take risks with your investments, then you will be able to sleep better at night knowing that your money will grow to meet future needs.

Certificate of deposit (CD) (Savings)

A certificate of deposit (CD) is a savings account that is insured by the FDIC. Your money is locked in for a specific amount of time (usually between 3 months and 5 years) at an interest rate that you agree to when opening the CD. The benefit of investing in CDs is that you will have access to your money at the end since it’s not considered “liquid”. One downside, however, is that if interest rates have gone up during this time, your rate may no longer be competitive with what’s being offered elsewhere.

If you don’t want to worry about switching from one type of investment to another as interest rates change, then a CD ladder is something that you should consider. This is a strategy where your money is divided into 5 CDs with different terms (e.g., 1 year for 25% of your money and 2 years for the rest). If you deposit this money in advance, then it will automatically be reinvested into 5 CDs when they mature so that you have a level stream of income without having to wait until the end.

ETFs (Exchange-traded funds)

An exchange-traded fund (ETF) is similar to a mutual fund but has lower fees because it is traded like a stock on the market. In other words, ETFs are index funds that have been turned into tradable assets through blockchain technology. The price per share goes up if many people buy it, and it goes down if few people buy it. They usually track an index or sector of a specific industry such as renewable energy or US healthcare.

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