4 Things Millennials Can Teach Retirees About Investing

Daniel Penzing
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Invest With Care

Millennials do a great job of being judicious spenders and prudent investors which can be incredibly helpful for retirees in the long run.

Many aren’t too keen on purchasing expensive things like a house that would cost them half of their life’s savings. Instead, they put their money towards other assets, like building equity and increasing the value of their investments.

Millennials are the fastest growing segment of the population in the U.S. Some spend lavishly on designer clothes and travel, while others avoid any form of debt and save aggressively for their future goals. Historically, these spending decisions would have made a big difference in their ability to make ends meet.

On the other hand, millennials are also brand-agnostic, and this is a very good thing for retiree investors. They are willing to invest in new types of financial assets and in companies that they knew little to nothing about. Because of this, they have made many forward-thinking decisions about their future.

Statistics bear this out; one in five millennials didn’t invest in the stock market, while one-third of millennials don’t prefer to buy stocks.

Use More Technology

Millennials and retirees may be living in the same generation, but they aren’t quite on the same page when it comes to banking, investing, and money management. Where retirees tend to be more conservative with their money, millennials are taking a more aggressive approach to investing. This idea of not being afraid to take risks and being open to utilizing technology is one that retirees should learn a thing or two about.

Tech Savviness

According to a 2016 Associated Press/CNBC poll, 71% of Millennials reported using technology to interact with their finances, and nearly half of them used money management apps.1 In fact, this generation is more likely to use the apps their banks offer, as well as those from other finance software companies. This use of technology makes it easier for millennials to remain on top of their finances, rather than doing everything manually.

Millennials also tend to have a better understanding of their credit scores, thanks to the statistics accessible through Facebook and other online social media, as well as services like Chexsystems. Because of this improved knowledge base, they can head off any negative financial issues before they arise.

Add Alternatives to Your Portfolio

There is a common misconception that millennials have no interest in investing, but nothing could be further from the truth. In fact, they could teach our grandparents a thing or two about investing in alternatives.

Some of the mistakes that millennials and retirees may make are the following:

  • How Safety Leads to Losses – retired clients are often so concerned with protecting principal that they will shy away from asset classes that have historic volatility
  • Keeping to a Fixed Strategy – retirees can stick to a portfolio that they have enjoyed historically and potentially miss opportunities
  • Failing to Understand Personal Risk Tolerance – retirees may be afraid to pull the trigger because they don’t really understand the strategy

On the other hand, millennials are often rewarded for taking bigger risks. If you have enough time on your side and are looking to maximize long-term investment opportunities, why not branch out of the standard investment account?

Sure, it may be a little scary at first, but with a good investment strategy, you can quickly help your portfolio rebound from the overall market. Adding alternatives is an excellent way to diversify your portfolio and you can feel comfortable enough to bolster growth and even keep up with inflation.

The bottom line is if you are constantly afraid of suffering losses, you are going to suffer losses. Risk-averse investors should consider alternatives as a prime way to diversify and potentially enjoy large gains.

Invest in Yourself

From a young age, millennials have been told that school is important and that if they are going to work hard in school, they will be rewarded when they enter the working world.

I’ll be the first to admit that perhaps this logic is faulty.

Millennials’ ability to work hard early on in their careers might have just been due to the fact that they knew if they didn’t, no one else would.

But whatever the case, that notion of “real work” is what has shaped they way they go about their lives, and with that in mind, I’d like to bring some of their beliefs into your life. Especially as you enter retirement.

One of the biggest pieces of advice that I’d like to preach to you today is a bit contradictory to the law of investing, but it works.

That is: Invest in yourself and then practice patience.

By investing in yourself, you’re making yourself into the best version of yourself and therefore giving yourself a leg up on everyone else.

And then, of course, the best way to stay competitive is to practice patience.