How to invest like millennials

Rising housing costs, soaring student debt and low wage inflation have left millennials with stretched budgets. Worrying research from the Resolution Foundation recently found that a third of all millennials could still be renting property when they come to claim their pension, thanks to high property prices in the UK. But that hasn’t dampened spirits when it comes to investing, it seems.

Millennial investors are more optimistic about the stock market than any other investor group, according to a new study. A whopping 76% of these 18-34 year olds are positive about their portfolios compared to 62% across all age groups. The same proportion are planning to increase the amount they invest this year, compared to an average of 54% across all age groups.

In addition, millennials have a greater appetite for risk with more 18-34 year old investors willing to accept a higher level of risk to maximise returns over the long term than other investor types. The research, by Investec Click & Invest, revealed that when it comes to investor goals, millennials are taking a long-term view. A third are aiming to achieve better returns than cash while another third said they are investing for retirement. For a third of 18-34 year olds, they want to be more in control of their savings pot and 21% believe that they can achieve better returns than their company pension(!).

Start early

Saving at an early age is to be commended. Not only will you save more, but there’s also the added benefit of compound growth when you reinvest income generated. This is the term for generating income from previous income.

In your 20s and 30s most experts are unanimous that this is a time in your life when you can ignore volatility as there is plenty of time to ride out any short-term losses and see the value of the investment recover. During this decade you will hopefully build on the successes of your thirties and potentially add significant sums to your investments as your earnings rise.

That’s not to say it’s ever too late to start investing. It’s not completely uncommon to imagine there are some people turning 40 with no pension savings at all. By investing 17% of your gross annual salary you could still afford to retire in your 60s and have enough money to live to 100, according to calculations by Cazenove Capital and Schroders, based on a range of assumptions for someone aged 40 earning £45,000 a year today. But saving earlier means you don’t have to part with larger monthly amounts later in life, possibly when family life is getting more expensive.

There is no one-size-fits-all approach and it is best to devise your own tailored approach to investing. You can either use some of the tools available on the platforms which offer fund recommendations, or talk to a financial planner or independent adviser if you’re unsure.

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Photo by Igor Miske on Unsplash

Article is accurate at date of writing.