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.
This is what happens when you approach investing without the proper mindset. The mindset of trying, failing, and not trying again.
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.
I’m here to help you change yours too.
So in order to combat this 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.
We are a generation that wants everything right now... and investing isn’t any different.
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.
As an investor, you have to be able to deal with the daily fluctuations in prices because you are confident that the security (security is another word for “stock” of the newbies here) you invested in will provide sustainable growth for your wealth.
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.
So my recommendation to combat this problem 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.
Which leads me to my second point..
Millennials get caught up in the hype.
Let’s take the BitCoin bubble for example.
When BitCoin became popular, a craze overwhelmed the country.
Everybody I knew was talking about this “cryptocurrency” that had the power to put banks and other financial institutions out of business.
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…
Millennials came late to the party.
You see the millennial generation tends to wait until things are “lit” 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.
In this case, by the time they would begin to participate, the valuation would be nearing its peak.
Unforeseen at the time, a crash was on the brink.
This “crash” would lead to a massive selling often at some of the lowest valuation points because of panic in the market.
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 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.
This is totally different from just scrolling through watchlists and buying the cheapest stocks 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.
Learn the market you are getting into before taking the dive.
The worst thing you can do is make an investment decision based solely on someone else’s opinion.
Know that “more” is not always better.
Your pockets may seem “fatter” with those extra shares of company XYZ, but unless they are built on a solid foundation, 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 will influence you to make good investing decisions in the future!
Thanks for reading!
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Have a great day!