How Can a Millennial Start Investing?

   Being a Millennial I personally saw the devastation that the 2007 financial crisis caused. It showed how careless Wall Streeters could collapse the global economy through their own arrogance. I saw friends get evicted from homes due to mortgages payments their parents could no longer afford. I witnessed friend's parents being laid off from jobs that could no longer afford to pay them, and I witnessed the first-hand financial stress that my parents went through. I didn't fully understand what was going on, I was far too young and uneducated. With a full understanding of what caused that financial crisis, in hindsight I think it took a psychological toll on the young generation of Americans. It showed how quickly wealth can vanish, and how contagion can spread throughout the global financial system like a deadly virus.

   So how has this impacted young people financially from a psychological standpoint, do we view future uncertainty as a reason to spend today rather than save and invest for tomorrow? Does the need for materialistic goods out-weigh the potential to triple your own wealth autonomously? Are we buying things we really don't need? Well, one thing is certain and that is Millenials haven't fully grasped the concept of savings accounts. In the chart below you can see 46% of millennials have a whopping total of $0 in their savings account, up 15% from last year. On the surface that is a pretty terrifying thought, however, not having a savings account isn't such a radical idea when you're collecting interest at a historically low-interest rate. It would make much more sense to put your money elsewhere such as in stocks, bonds, ETF's and other various investments that will offer you a much higher return. Sadly, I don't believe this is the case. 

   Well, surely this is due to the young age demographic and lack of financial experience. When you look at the next chart below you can a similar narrative with older and supposedly wiser millennials aged 25-34. 

   The overwhelming majority (61%) of older millennials still show little to no desire in having at least $1000 in a savings account. This could be for a number of reasons. Millennials like to rent rather than buy which is essentially throwing money out the window every month rather than building equity in a house or condominium. The argument for renting rather than buying is that obviously, it will be cheaper than having a mortgage payment and other fees that come along with purchasing a property. Millennials also eat away a large chunk of their savings at restaurants, bars, and coffee shops. Resturants are great, don't get me wrong. It's great to go out with friends to eat, grab some drinks and relax in a nice atmosphere where you can escape from your responsibilities for a while and enjoy the moment. However, this comes at a price of course. It is much more expensive to spend money at a restaurant as opposed to buying ingredients at a grocery store and cooking for yourself. This is one of the things that saves me loads of money. Learning to cook for myself has saved me well over $1000 annually. Let's take a look at a quick example to understand how easy it is to throw away money at restaurants. 

Let's say you go out to eat with friends twice a week. Your meal is $10, you get a $3.50 drink and you're hypothetically not a dick so you leave a 15% tip. [(10+3.5)*1.15 = 15.53] 

Now that's $15.53 twice a week, so $31.06, 52 weeks in a year so total in one year you spent $1,615.12. [(15.53*2)*52 = 1615.12]

That's a lot of money that you'll never get back, it'd be much better off sitting in an investment account rather than in the cash register of a restaurant. Starting to invest is much easier than you think, below I'm going to layout the best ways to start making your money work for you.

Direct Exposure

   Five years ago if you said you wanted a stock brokerage that had no minimum deposit requirement and no commissions on trades you'd simply be out of luck. However, today this is a realistic ask made possible by Robinhood. Robinhood disrupted all the traditional brokers by targeting Millenials who wanted to invest but couldn't afford the high commission fees and minimum deposit requirements. Starting off with $176 million in venture capital funding, Robinhood has come a long way with a current valuation of just over $1.3 billion and over 2 million users. Robinhood offers you the ability to buy shares of publicly traded companies as well as Exchange Traded Funds (ETFs). Robinhood launched originally as solely a mobile application but is launching their web version within the next coming months. Robinhood is also planning to start offering future contracts for stocks and ETFs. Compared to traditional stock brokerages which charge anywhere from $4.95 - $6.95 commission fees along with minimum deposit requirements of close to $2000, Robinhood gives young investors the clear financial advantage.  I will provide links below to download Robinhood for both Apple and Android devices. Robinhood is also currently doing a new user promotion offering new users the chance to get a free stock if they use a referral code. I will provide my referral code below if you would like to get a free random share of a company when you sign up.


Robinhood Download Apple: 
https://itunes.apple.com/us/app/robinhood-stock-trading/id938003185?mt=8
Robinhood Download Android: https://play.google.com/store/apps/details?id=com.robinhood.android&hl=en 

Robinhood Referral Code: http://share.robinhood.com/ianu3

Micro Investing

   If you want to subconsciously invest then I would recommend an application called Acorns. Acorns has helped me save/earn close to $1000 since I started using it in the Fall of 2015. Acorns works by linking to a credit or debit card that you use and rounds up to the nearest dollar for every purchase. So for example, let's say that you buy a soda at a gas station and it is $1.75, Acorns rounds up to $2 and throws the remaining 15 cents into a diversified investment account. The investment philosophy Acorns uses is based on a concept from a Nobel prize-winning economist. Acorns allows you to select how aggressive or moderate you want your portfolio to be. Acorns is also working with top brands that consumers love to get you cash back on purchases that will go into your Acorns account. Acorns also offer a referral code to get a free $5 when you first start so I will leave my referral code below. To better visualize how Acorns can better your financial footing I've provided a link to a video by them below. 

Acorns Explanation Video: https://youtu.be/zWftVEaTNJg

Acorns Referral Code: https://acorns.com/invite/MCHCYW

Acorns Download Apple: https://itunes.apple.com/us/app/acorns-invest-spare-change/id883324671?mt=8

Acorns Download Android: https://play.google.com/store/apps/details?id=com.acorns.android&hl=en

Automated investing

   Now if you have a larger amount of money laying around and you don't really know what to do with it then I would recommend two industry disruptors, Betterment and Wealthfront. These are automated financial advisors that will use proven investment strategies to safely manage and grow your wealth over time. Traditional financial advisors and money managers were incentivized by commissions which made for a toxic environment where the focus was not solely on bettering the client. With Betterment and Wealthfront you get all the perks of traditional financial advisors and money managers only with much lower fees thanks to industry-leading technology. I'll provide links to both of their websites below if you're interested in learning more.

Betterment: https://www.betterment.com/

Wealthfront: https://www.wealthfront.com/


   There are plenty of ways you can start investing today and grow your wealth for tomorrow. The companies I listed above give you the opportunity to reach whatever personal financial goals you have. If you have any questions, comments or concerns you can feel free to either email me at iangkunsworth@gmail.com or leave a comment below.