Best Investment Ideas for Millennials: Complete Guide

By investing at a young age you set yourself up for a comfortable retirement. Everything you need to know about investing for millennials
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People who are between the ages of 23 and 38 are part of the millennial generation.

This group of individuals faces economic challenges of a booming economy that’s on the brink of a possible recession. Millennials are also the first generation to grow up with tech, and most of them owned a device from an early age.

This combination of factors makes millennials a unique generation that has both opportunity and information at their fingertips. The research also shows that millennials are doing well financially. A recent study by Pew shows that the average millennial household income is $69,000.

Millennials also have more disposable income than previous generations, giving them more opportunity to invest their money. However, studies also show that while millennials are among the smartest generation of humans to walk the plant, they also have low levels of financial literacy.

Millennials are more likely to spend their money than they are to save. The social media theme of “live your best life,” means that millennials are more inclined to value experiences over savings.

However, if you’re one of the millennials that are thinking outside of the box, then you’re probably wondering how to invest your surplus income.

By investing your money, your money works for you – Instead of you working for your money. By investing at a young age and building a portfolio, you set yourself up for a comfortable retirement.

Here is everything you need to know about investing for millennials.

Millennials and Savings Rates

According to recent surveys, 44-percent of all millennials have enough savings to service three months of expenses. This figure was up from 32-percent in 2018. From the data, it seems like millennials are starting to become financially responsible as the generation matures.

Still, this figure means that over 50-percent of all millennials don’t have enough cash to make it through a quarter of the year if they lose their job. That’s a shocking statistic, and digging deeper it reveals more.

Almost two-thirds of millennials state that they are living from paycheck to paycheck, and a further 22-percent say that they don’t have $500 to fund an emergency expense. This scenario presents a different picture to what you might expect from a generation that earns an average household income close to $70,000.

A Schwab survey also shows that millennials have a distrust of the financial system, and they believe that saving for retirement is a moot point. Most believe that the US government debt is in an unsustainable position. As a result, they feel investing in the stock market or portfolio funds is a risky practice. As a result, fewer millennials are saving, and more spend everything they make.

Millennials & Money

Read: Millennials & Money: The Personal Finance Struggle is Real

Is Student Debt Crushing the Millennial Generation?

The current student debt load is approaching $1.6-trillion, and the average college student graduates with over $36,000 in student loans. As a result of the increase in the cost of college education, more millennials are postponing critical life events.

Research shows that the average student loan term starts at 10-years. However, most students end up taking 21-years to pay off their loans on average. As a result of economic hardships and unemployment, students are refinancing their loans at a rapid rate.

However, college students that go on to successful careers are also delaying starting a family and buying a home. The costs of student debt are affecting the economy, with more millennials choosing to live at home until they pay off their student loans.

Should You Invest or Pay Your Student Debt?

If you have outstanding student loan debt, then the best thing you can do when you start investing – is pay off the loan. Debt costs you money, and by paying it off early, you reduce the interest you have to pay. This strategy is as good as saving money in the bank, as you’re saving interest charges.

Paying down your student loans should be a priority before you start thinking about investing. After you reach a sustainable debt position, you can start looking at investment options.

Read: How To Pay Off Student Loans Fast: Complete Guide

Are 401(k) and IRAs Good Investments?

All millennials should start their investing career in low-risk assets that require no personal management. 401(k) plans and IRAs are the best assets to add to your millennial investor portfolio. Senator Roth introduced the Roth IRA in the early 2000s as a way to inspire young people to save.

A Roth IRA is different from a traditional IRA in the way it allocates taxes. With a traditional IRA, you pay tax on profits when you withdraw, and no taxes on contributions. A Roth IRA works the other way around. The IRS taxes you on your contributions, but your withdrawals are tax-free.

This benefits millennials because you start your career at a lower tax rate than at the end of your career. As a result, the taxes you pay on your contributions are minimal. You then get a tax-free withdrawal when you are older and earning in a higher tax bracket.

IRAs are pooled investments where you hand your money over to a financial services firm. The firm allocates your cash to a shared portfolio of stocks and bonds. Some mutual funds invest in other assets like property portfolios and currencies, but most only deal with equities and bonds.

When purchasing an IRA, look at the costs associated with managing your money. Good funds can net you an annual return of between 6 and 8-percent. The compounding effect of the interest you earn starts small but grows exponentially in the latter years of the investment.

The government allows you to contribute $6,500 annually to your IRA, so make sure you maximize your contributions and get an early start on your retirement savings.

What's the Difference Between a 401k & an IRA

Read: What’s the Difference Between a 401k & an IRA? Complete Guide

What are the Benefits of Investing in Real Estate? – As a Home Owner

After establishing the foundation of your portfolio with an investment fund, it’s time to move on to other asset classes. Real estate is the cornerstone of wealth for Americas wealthiest. Owning real estate is vital for investors, and there are two key ways to utilize this asset class in your investment portfolio.

Buying a home is the birthright of every American and part of the American dream. Why bother paying rent to someone when you can invest in a condo or apartment? Take your rental expense and funnel it into real estate to pay a mortgage. By owning your home, you get to take advantage of not throwing your money away to a landlord every month.

A starter apartment is a great idea, and you can use it as leverage when applying for a home when you start your family.

What Are the Benefits of Investing in Real Estate? – As an Investor

While owning your home is a great way to provide your portfolio with another asset, it’s more of a liability if you decide to live in the property. Real estate costs money in HOA fees, utilities, and maintenance.

Investing in property for cash flow is an entirely different strategy. Real estate investors look for properties that they never intend to use for their residence. Instead, these investors are looking to rent out the real estate and make a profit.

For instance, let’s say you meet your partner and decide to move into a new house to start a family. If you own a condo, then you can rent this out to a tenant. By now you’ve probably paid off a significant amount on the mortgage. If you refinance this and extend the loan term, your money payment will come down significantly.

If you rent your condo to a tenant, and they pay you more in rent than you have to spend on the mortgage installment, that’s positive cash flow. Investors call this cash flow, “passive income,” and its money that you did not have to work for, all you did was rent someone a home.

Earning a passive income from real estate can boost your portfolio and help you to find other assets to invest in with your surplus cash.

Real Estate Crowdfunding

There has been a rise in companies which allow you to invest in real estate property throughout the US.

The overarching concept to the platform is that the sought-after real estate industry is no longer reserved just for institutional investors – you can invest from as little as $500 and enjoy dividend payments to supplement your regular income.

Fundrise Review

We think this is an intriguing idea and one of the leaders in this space is Fundrise. If you are interested in learning more, take a look at our review.

Fundrise ReviewFundrise Real Estate Crowdfunding - Visit
Product TypeReal Estate eREITs and eFunds
Potential ReturnAverage return in 2018 was 9.11%
FeesAround 1% (Asset Manage Fee 0.85% & Advisory Fee 0.15%)
Min Investment$500
Property TypesCommercial, Residential, Single Family

Visit Fundrise

Other Real Estate Crowdfunding Sites

Do You Have a Business Idea?

If you have surplus cash coming from your property investments, save it until you have enough money to invest in a business. Buying a cash business is another method of producing passive income. The key to becoming a business owner – is not to work in the business.

You want to buy a self-sustaining business that already comes with a management team and employees. All you do is take over the ownership, and the business keeps running as it did before the sale. Working in a business is a quick stop to the poor house. When you work in your company, you are an employee, not an investor.

Don’t make the mistake of founding a startup. These businesses take forever to turn a profit, and they’ll suck your savings dry. Always look for an established business that was already producing a profit. Take the company’s books to your accountant and ask them to verify the deal.

Good examples of cash business are cash washes and laundromats. These companies require little in the way of stock and expenses, and the returns are high.

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How Do Millennials Invest in The Stock Market?

Surveys show that millennials have a distrust of the stock market. These individuals were young enough to see the impact of the Great Financial Crisis of 2008, and its effects on their parent’s financial position. As a result, the stock market remains a mythical area of investment underutilized by millennials.

However, for those millennials that choose to dip their toes in stocks, there are two primary methods. Parking your money with a full-service broker is one option. A full-service broker manages your money, investing it into stocks and bonds in an attempt to make a profit. This scenario describes how mutual funds operate.

However, as mentioned earlier, millennials are the most tech-savvy generation yet. As a result of growing up around devices and wireless connections, some millennials are resorting to trading the financial markets.

Some have tremendous success, and it’s possible to earn massive amounts of money if you handle your investment ideas yourself. Some traders may lose everything, but others go on to amass vast fortunes.

By selecting a discount broker platform, the broker gives you direct access to the market. You then use customized trading software to enter and exit trades. Since the broker is not investing your money, you pay less in fees and commissions on your trades.

Ally Invest ReviewAlly Invest is a top broker site for trading shares, read our review here.

Are Cryptocurrencies and Gold a Good Investment for Millennials?

The United States removed the US dollar from the gold standard in 1974. Since this date, the dollar, and all other world currencies run a fiat standard. “Fiat” means “by decree,” and it describes the current financial system perfectly.

In the days of the Bretton Woods system and the gold standard, banks pegged the value of the currency to gold. However, fiat currencies have no gold backing and only exist as a means to represent your time and labor. The dollar gets its value because we have to pay our taxes in that currency, as stipulated by law.

Unfortunately, a fiat system is prone to failure, and the last 2,000+ fiat currencies in global history all fell to zero eventually. As protection against financial disaster, look to keep around 5-percent of your portfolio in gold bullion, such as coins or bars. Avoid commemorative coins as these sell for inflated prices.

Bitcoin is more akin to a millennial investment that gold bullion. some analysts call cryptocurrencies the “new gold.” However, digital currencies are prone to volatility and experience wild swings in price action. Still, experts agree that crypto is how the financial world is moving. You can future-proof your portfolio by adding 5-percent of your investments to bitcoin.

Should you Invest in Bitcoin

Read: Should you Invest in Bitcoin? Complete Beginner’s Guide

Wrapping Up – Key Takeaways

As a millennial, you need to start saving for your retirement as soon as possible. The earlier you start, the sooner you’ll achieve your retirement goals. Investing your money instead of spending it puts you on the path to financial prosperity.

Start small by investing in stable financial vehicles like mutual funds, IRAs, and 401(k) plans. After you finish paying off your debt, start looking for real estate to purchase. After starting your family and moving into a new home, use your condo or apartment as an investment property to build passive income.

Think about buying a cash business with your profits, and then look at getting involved in the stock market using a discount broker. Diversify your portfolio against risk by adding gold and cryptocurrencies.

If you follow this strategy, you should find that your investments provide ample financial support for your retirement.


Oliver Dale is Editor-in-Chief of MoneyCheck and founder of Kooc Media Ltd, A UK-Based Online Publishing company. A Technology Entrepreneur with over 15 years of professional experience in Investing and UK Business.His writing has been quoted by Nasdaq, Dow Jones, Investopedia, The New Yorker, Forbes, Techcrunch & More.He built Money Check to bring the highest level of education about personal finance to the general public with clear and unbiased

1 Comment

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    Gelt Financial Reply

    Well written and to the point. I appreciate the detail in this article!

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