Some Tips From the Industry Experts for the Millennial Investors
Thinking of stepping into the investment world? If you’re a millennial, this could be the perfect time! But, like diving into unknown waters, investing without knowledge might drown you. So, let’s make sure you’re equipped. Here are three key tips to get you started:
1. Plan Early For Retirement
Begin your journey to retirement as soon as you can. Why? The math is simple: Start earlier, earn more. Especially if you’re young and have fewer responsibilities, like mortgages or family expenses. Let’s break it down:
Say you’re 25, and you set aside just $200 a month, with a 7% annual return. By 65, you’ll have around $525,000. But wait 10 more years to start? You’ll only have around $244,000 by 65. Quite a difference, right?
2. Diversify Your Investments
Ever heard the saying, “Don’t put all your eggs in one basket”? It holds especially true in investing. By diversifying, you spread out risks. Think of it like a buffet – a mix of different dishes ensures a satisfying meal.
Studies suggest that where you put your money (asset allocation) affects 91% of your returns. The other bits come from stock choices, timing, and some other factors. So, diversifying helps keep your investments balanced, safer, and often, more fruitful.
3. Include Dividend Stocks In Your Portfolio
Many young investors aim for the moon, often overlooking the slow, steady earners like dividend stocks. Think of these as the tortoises of investing – consistent and reliable.
Here’s an example to illustrate:
Buy 100 shares at $20 each from two companies. Company A offers no dividends, but Company B provides a 3% annual dividend. After 30 years, with a consistent 6% growth:
- Company A shares: $11,486.98
- Company B shares (with reinvested dividends): $83,353.98
That’s the magic of compound growth with dividends!
Remember, investing isn’t just about making quick money. It’s a journey. Equip yourself with knowledge, make informed decisions, and watch your wealth grow steadily.
Read also:
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How to Start Planning For Retirement in Your 20s and 30s
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