The big financial mistake Millennials make

Avoiding the stock market will cost you in the long run

As a Millennial on staff, I was startled to learn that most of us Millennials are opting out of a valuable financial strategy. The stock market.

According to a recent study by NerdWallet (a favorite finance site for Millennials), a whopping 63% of us are choosing to ditch investing as a way to save for the future.


Before I go any further, let me just say that I am part of the 37% of Millennials who DO invest in the stock market (for reasons which will soon become clear).

As the study shows, investing is not part of most Millennials’ savings strategy. A more popular track is sticking with low-risk strategies like traditional savings accounts and no-interest-cash tucked away in a safe place (under the Casper mattress). This could be partly due to seeing our parents’ (and most people’s) investments tank during the 2007–2008 recession. Whatever the reason, where money is concerned, Millennials like to play it safe. And for most, this means avoiding the stock market.

Bad idea.

The cost of not investing

Not investing could cost you. A lot. Try a head-spinning $3.3 million of investment earnings over your lifetime, according to NerdWallet.

To be fair, it’s important to note that this study was based on the assumption that market returns and interest rates of the next 40 years will approximate those of the last 40 years.

In NerdWallet’s words…

“NerdWallet looked at the last 40 years of market returns and interest rates to determine how much a 25-year-old who today earns a median annual income for that age ($40,456) and saves 15% would accumulate over the next 40 years, if conditions were similar to those of the past four decades.”

I don’t have a crystal ball, but this seems pretty unlikely. Still, the past is all we have to go on. If reality turns out to be even close to the study’s projections of financial loss, Millennials might want to re-think their no-market approach. (For details on NerdWallet’s calculations, see the methodology.)

The problem with us Millennials is that we grew up in a time of instant gratification (note the 2-day home delivery and drive-thrus for everything from burgers to banking). This carries over to our financial strategy.

Long-range thinking

However, long-range thinking is critical to a sound financial plan.

I’ll be the first to admit that if you are invested 100% in the stock market, it’s possible to “lose” 10%, 20%, 30%, 40%, or even 50% over the next year. Naturally, just the thought of such loss is enough to make your hair stand on end — even without the gel. But remember, you’re not realizing the loss unless you sell the assets and don’t reinvest.

The great thing about being young is that you’ve got time on your side. For the most part, the old adage that “time heals all wounds” is true — at least for financial wounds. It may take a while for your investments to recover from any losses, but the truth is, you’re not going to retire for some time. Even you early-retirement dreamers have years of saving ahead of you.

4 key investment strategies to follow

There are many ways to invest in growth and income assets, but here are my top four picks for Millennials to consider.

1. Invest in your company retirement plan, most likely a 401(k)

  • The money going into a “traditional” plan is tax-deductible.
  • If the company offers a match, make sure you contribute enough to get the full match. Try to contribute more each year. Every little bit will potentially multiply over the course of many years.

2. Invest in a Roth IRA or Roth 401(k)

  • The great part about a Roth is that, while the money going into the account is taxed, the money coming out (both contributions and earnings) is tax-free as long as it is a qualified distribution. (Visit for information about tax considerations and contribution limits.)

3. Open an investment account at a discount brokerage firm or mutual fund firm

  • Money going into this account is taxed, but gains on investments that are held for longer than one year will likely receive favorable tax treatment on the gains. (For most investors, the capital gains tax rate is generally lower than their corresponding marginal income tax rate.)
  • It’s a great idea to set up an automatic monthly contribution into your investment account from your bank/cash account. This way you ensure that you pay yourself first. You may not notice much growth during the first few years, but as you consistently buy stock or mutual funds, you will hopefully see your nest egg grow.

4. With any investment account, it is important to follow a practice called dollar-cost averaging

  • This strategy takes the emotion out of investing by allowing you to make continual and consistent contributions rather than trying to time the market. Dollar-cost averaging ensures that you are not investing all your money at the peak of the market.
  • Keep in mind that dollar-cost averaging does not assure a profit and does not protect against loss in declining markets. And of course you should consider your financial ability to continue purchasing through periods of low price levels.

My advice?

Take time to educate yourself. Create a budget. Make regular contributions to an investment plan that suits your needs and risk tolerance. Ask for help if you need it and don’t let procrastination stop you.

Your future self will thank you!

Required disclaimers: The above information is the opinion of the author, and should not be construed nor is intended to be investment advice. Investors should carefully weigh all potential risks, and should perform their own due diligence (or hire qualified counsel to assist them in doing so) prior to making any investment decision. To the maximum extent permitted by law, Joslin Capital Advisors, LLC disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses. Finally, past performance and risk characteristics of any investment provides no assurance of future returns or risks.

Advisory services are offered by Joslin Capital Advisors, LLC, an SEC Registered Investment Advisor.

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