A guide for millennials to start investing

As millennials advance in their careers and improve their financial standing, it's crucial to start saving and investing for long-term goals like retirement. Starting early enhances your prospects for achieving those goals.

Last updated on July 10, 2024, and last reviewed by an expert on July 10, 2024.

Millennials haven’t had an easy journey. Born between 1981 and 1996, this generation has faced significant challenges, including the Sept. 11 attacks, subsequent wars, the worst recession since the Great Depression, a student loan crisis, and a global pandemic. It’s no wonder that saving and investing for retirement might not have been a top priority.

However, with most millennials having finished school and worked for several years, it’s time to consider investing as a way to achieve long-term financial goals.

Let’s explore some investing basics and why it’s crucial to get started.

Why it’s important for millennials to invest

Experiencing the 2008 financial crisis may make investing seem risky, but avoiding investments carries risks too. Not saving and investing in your mid-20s to mid-30s can be detrimental. Investing early gives your money time to grow. Despite market fluctuations, it’s rare for the stock market to stay down for extended periods.

Suggested read: 6 best investments for beginners

Stock investments yield higher returns than cash and bonds over time. Money in savings accounts remains stagnant and loses value due to inflation, while stock market investments can grow through compounding. Large capitalization stocks returned about 10 percent annually from 1926-2020. In comparison, long-term government bonds returned about 5.5 percent annually, and T-bills around 3.3 percent annually.

Building wealth over long periods is best achieved through a diversified portfolio of common stocks. Investing over time creates a snowball effect. Starting to compound early allows the interest on your investments to generate further interest, leading to substantial growth.

For instance, if you invested $6,000 annually at age 25 and earned $100 in interest that year, by age 26, you’d earn interest on $6,100, then on $6,300, and so forth. Over the years, this would result in significantly higher returns compared to simply saving that money.

Educate yourself on the basics

Learn the types of accounts

These are some of the most popular types of accounts, but there are others worth knowing about as well.

Best investments for millennials

These investment options offer various ways for millennials to build wealth over time, depending on their individual financial goals and risk tolerance.

Suggested read: How to invest in stocks: A step-by-step guide for beginners


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