If you are like me, the average millennial, then you probably had some struggles when getting started in the investing game. Maybe you would get started, lose a little bit of money (a lot if you were unlucky), then get discouraged.. causing you to find other things to do with your money.
It definitely does to me.
In my case, I would go through this cycle over and over again. The cycle of thinking there was a “right time” to get started investing. Always telling myself that I would get started if this happens or if that happened.
This left me taking uneducated investments month and month, and when that investment didn’t make me a millionaire within two weeks, I would pull my money out whether I was in the green or in the red.
By the way, most of the time, I was in the red.
This is what happens when you approach investing without the proper mindset. The mindset of trying, failing, and not adjusting yourself before trying again.
Every time I would experience a “failure” in investing, I would not take the responsibility that it was not me who failed. I would think that it was the market that had failed me.
And that is the most terrible way that you can approach any kind of investment.
Not investments will be blatantly obvious for you to make money. If it were, then some other more experienced investor would have sniffed it out long before you have even had the chance to think about taking advantage of it.
The mindset that most millennials (and centennials) approach investing with, is what puts them at a severe disadvantage compared to those who have changed their thought process about investing.
This thought process has kept many of us in chains because we have been getting so accustomed to getting things exactly when we want them, and patience seems to be a thing of the past.
I had to learn to change my mindset the hard way, but I’m here to help you change yours with my personal experiences.
So in order to combat the ongoing problem (and provide value to you as a reader) I have decided to make a list of a few reasons for why I believe millennials suck at investing.
Reason #1 is that..
Millennials want instant gratification.
There I said it.
I’m sure we can all agree that this statement is true.
We are in an era of instant food, instant TV, instant internet, everything instant, instant, instant.
We are a generation that wants everything right now... and investing isn’t any different.
For those who are starting out in the investing world, as soon as they try to look up any information about stocks, investing, passive income or anything of the sort, they are immediately flooded with influencers trying to sell the idea of getting rich quick.
I can not tell you the amount of times that I had to skip through a Timothy Sykes stock trading course ad to get to some information that I was trying to find about investing.
Now some of these influencers actually do have some value to offer you if you decide to go in their certain niches, but for a beginners, I would stay away because a lot of the strategies are too complex or require a lot of capital in order to get started.
The investing world is not for those who want easy in and easy out. It is very easy to get caught up the traps of day trading and stock option trading and this or that, all in the sense of making a quick buck.
However, this is not the best way to ensure that you will achieve financial freedom and maintain long-term wealth.
When trying to find a way to build long term wealth, you want to find an income stream that you can build up front, but will continue to pay you after all of the work is done.
This is called passive income, or as I like to call it, the eighth wonder of the world.
And in order to build passive income, you have to learn how to keep your emotions in check when investing in assets.
As an investor, you have to be able to deal with the daily fluctuations in prices because you are confident that the asset or security (security is another word for “stock” of the newbies here) you invested in will provide sustainable growth for your wealth.
These assets can be anything. From stocks, bonds, real estate, options, shoes, cars. Pretty much anything that can provide you cash flow. Ideally, passively.
Also as an investor, you have to be able to do you own due diligence before investing. Even if you are wrong with your calculations, you will have a much better chance of recovering your money than if you were day trading in the stock market where a few hours in the wrong direction could prove detrimental to your account value.
This is why as an investor, you want to play the long game. My first investment into the real estate atmosphere will be in the rental market. I plan to buy a rental property by the end of 2020, or mid 2021 at the latest. This is because rental properties are a great source of passive income, and with enough passive income, you will be able to replace the salary that your day job is paying you.
So my recommendation to combat the problem of instant gratification is to learn to be more patient with the stock market.
The market is like a beautiful girl who you are trying to attract. You don’t want to just run up to her and start throwing money in her face.
You have to get to know her. Find out what she likes and what you like about her, and then decide where to proceed from there. Also, you wouldn’t want to go for the same girl just because all of your friends have, that would be foolish.
Learn what makes her happy and learn what makes her sad, then you will be able to use these as references to see how your investment is doing.
The worst thing that you can do is structure your personal investment plan based on what one of your friends are doing.
Which leads me to my second point and another reasons why millennials suck at investing.
Millennials get caught up in the hype.
Let’s take the BitCoin bubble from all the way back in 2018 for example.
I’m sure we all can remember when BitCoin became popular, a craze overwhelmed the entire country as everyone was talking about this “brand new” digital current that would change the world.
The currency was met with a lot of skepticism, but as the price kept rising and rising, a lot of people was experiencing the deadly sixth sense called the “fear of missing out”.
Everybody I knew who was in any investments at all were talking about this “cryptocurrency” that had the power to put banks and other financial institutions out of business.
Because the ball was slowly increasing and everyone began hopping on the BitCoin train, this caused a surge in demand for the currency causing the valuation to skyrocket, producing returns of 50% or greater in some cases, leaving many people thinking that this was the future of how to make money.
However, what most don’t understand is that what goes up… eventually must come down…
and, what happened was this…
Most millennials came late to the party.
You see the millennial generation in general tend to wait until things are “hype” before participating. They want to make sure that their friends are doing it, and maybe had a little success, before taking the plunge for themselves. This same trend is why apps like Tik Tok seem to suddenly blow up over night. Once millennials have the confirmation from other millennials that something is “cool” then they will participate as well.
In the case of the BitCoin bubble, by the time the millennials showed up and would begin to participate, the valuation would be nearing its peak.
Unforeseen at the time, a crash was on the brink.
But first came a mini-crash. The valuation fell a few percentage points and people began to lose a little trust in their beloved BitCoin. This mini crash would lead to a massive sell off with drove the prices lower and lower, often all the way down to some of the lowest valuation points because of panic in the market.
Now all of the millennials who shows up late to the party and bought at the peak of the BitCoin bubble were not selling at the lowest points that the currency had seen in months because they were afraid of losing it all.
This is what has been referred to in history as a behavioral gap.
A behavioral gap is when you buy when the price is high, and sell when the price is low, instead of the vice versa.
I will do an additional article about the behavioral gap, so make sure you subscribe for more content!
In order to combat the behavioral gap, you must do you own due diligence once again and have principles that guide you when you are investing.
It is very easy to get knocked off track when you don’t have a plan.
So, making a plan, and having the ability to stick to it will prove vital for your investing career.
Lastly, the third reason why I feel millennials suck at investing is..
Millennials tend to buy “cheaper” stocks.
Why spend $200 on one AAPL stock when I can get 800 shares of this unknown company XYZ for the same amount of money?
More shares is better right?
You have to understand that a cheaper stock price (not always, but in most cases) does not mean you are getting more value for your money. This is in the sense of non-related companies in non-related industries.
When investing, you should be focused on the quality of the stock that you are buying rather than the price of the transaction.
And getting the most value for money is what you want to be focused on.
This can be achieved by purchasing high-quality companies or companies that you have good reason to believe will continue to do well in the future. If you believe that the stock is undervalued by the market for some reason, then this would be the time to begin adding shares to your portfolio, not just because the share is trading below $5.
This requires a totally different mindset and work ethic from just scrolling through watch lists and buying the cheapest stocks that on there.
Finding value in everything you look for is the key to investing.
As the legendary Warren Buffett once said…
Price is what you pay, Value is what you get.Warren Buffett
In order to become a better investor, you must first learn to master three things.
How to be patient and wait for the right opportunities.
Learn the market you are getting into before taking the dive. Whether it is real estate, stocks, or some other investing avenue, make sure you know the ins and outs of the asset before putting your hard earned money at risk.
The second thing that you must master is learning how to…
The worst thing you can do is make an investment decision based solely on someone else’s opinion.
Learn how to do your own due diligence so that you are confident that the asset that your are acquiring is stable.
The third thing that a new investor must master is:
Knowing that “more” is not always better.
Your pockets may seem “fatter” with those extra shares of company XYZ that you bought for $0.15 per share, but unless that company is built on a solid foundation and has a stable projection of future cash flows, then you can lose a lot of money in a heartbeat.
With that being said, I hope that I was able to provide value to you reading this and I hope that will influence you to make better investing decisions in the future!
Thanks for reading!
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As I am not a Certified Financial Adviser, any information that you read here is purely for educational and entertainment uses only. For professional legal advice, contact a CFA.