Many millennials are starting to hit their stride financially as they become established in their careers and business ventures. Increased earnings and more on-demand financial literacy content create a growing desire to break free of financially irresponsible habits and mindsets.
With so much information readily available, it’s not unreasonable for millennials to ask which way is the right way, and more importantly — why? And with a variety of investing apps to choose from, the ability to purchase fractional shares, no commission fees, or minimum investment requirements, the barrier to entry is lower than ever.
Look for advice on which vehicles to open and what to invest in once they’re opened, and you’ll probably find some quotes from Warren Buffett advising a buy-and-hold strategy with low-cost index funds. This strategy, though tried and true, doesn’t have the same cultural cache as cryptocurrency. It doesn’t offer the same allure as picking an individual stock and then becoming an overnight millionaire if the right public figure tweets about it.
In a series of tweets, Elon Musk started a chain reaction that turned dogecoin, a cryptocurrency that was created as a joke, into a money-making machine for many, demonstrating the immense amount of power and influence public figures can have on both regulated and unregulated financial markets.
And who can ignore Reddit communities like WallStreetBets? Seeing a tweet of a stock pick or altcoin name can be the difference between overnight riches and a bad case of FOMO. Social media amplifies not only the communication of the next big thing but also the massive gains friends, family, and even colleagues have realized. This tempts the millennial investor to abandon the long game and dive right in on the next social media rally.
FOMO and short-sightedness can distract new investors from adhering to the investing strategy that has catapulted many long-term investors into wealth by simply starting early and investing often. Millennial investors should do the following three things to turn down the noise and minimize dissonance when it comes to investing for short- and long-term gains.
Create (and stick to) a strategic plan
A financial advisor or coach can help you create a plan that can be adjusted over time to meet major life changes like promotions, marriage, childbirth, and inheritance while keeping you on track in planning for retirement and other short- and mid-term financial goals. They can also be a sounding board to talk you down from making rash decisions or falling victim to FOMO.
Do your due diligence
It’s easy to get a hot pick from a group chat, forum, or tweet, but ultimately it’s you who’s taking the risk. Part of the due diligence process involves determining what your risk tolerance is by asset and dollar amount. If you can’t afford to be without that money, you probably shouldn’t be investing it.
Think long term
Although the two are frequently compared, investing is not gambling. However, anyone can use an investing platform to gamble if they don’t follow the first two points. If you approach investing as a means to make a quick flip, you’ll be relying on two things you can’t control: timing and media hype. Introducing strategy and due diligence puts measures of control on your investments, and your expectations will be realistic — growth over time, not a lucky break one day with the potential to lose it all the next.