Millennials and the Stock Market

It’s no secret that the stock market has played a major role in the financial success of many individuals. After all, many a financial advisor in Idaho or elsewhere would strongly recommend that clients use a diversified portfolio to further increase their wealth, but it seems that many millennials are reluctant to take this advice.

Of course, much of the problem originates with the financial situation many in this demographic already face. Student loans and stagnant wages make it difficult for many to gain the money needed to invest in the first place, and the recent stock market declines due to events in China have further discouraged those wary of investing.

These fears are reflected in statistics. Surveys have cited anywhere between 75 and 93 percent of millennials mistrusting the stock market as a source to increase wealth, with well under 25 percent actually investing in it.

But as many a financial advisor would note, the longer millennials delay investing, the more money they stand to miss out on. Individuals in Idaho and across the nation have long relied on the stock market to build wealth in a way that savings accounts and Social Security never would.

The volatility of the stock market (especially in the last decade) makes it seem like quite a dangerous place for undertaking any sort of investment activities. But those who fail to invest will ultimately miss out in the long run, as these investments yield much higher returns (in some cases, up to nine percent annually). 

In addition, there are ways to avoid risk. A financial advisor would typically recommend starting with a 401(k), an IRA or an index fund. While a 401(k) or IRA will begin with higher-risk investments (in part to increase the likelihood of big gains), as one nears retirement age, the investments automatically become more diversified in order to reduce risk and make growth steady and secure. 

A 401(k) or IRA help prepare individuals in Idaho and elsewhere for a comfortable retirement, while an index fund will allow for steady, diversified growth that is less likely to be severely impacted by an economic downturn. This money can be withdrawn or added to at any time in accordance with one’s needs and capabilities.

After these initial forays have been established, a financial advisor can help individuals decide how to use bonds, CDs and other investment strategies. While millennials from Idaho to the East Coast are still reluctant to take these steps, it is important that they do so as soon as their finances allow it—because the longer they wait, the more they miss out.

Kevin Johnson is a finance writer reporter for Fusion 360, an SEO and content marketing agency. Information provided by Sanctuary Wealth Management. Follow on Twitter