Being young isn’t all happy days. There are times when every individual goes through the phase where he/she questions themselves- What should I do? How should I make more money? Should I be investing my savings? Or should I live in the moment and just travel? It is a scary thought and one that the millennial generation thinks about everyday. But who says you cannot do it all? Travel, save, earn and invest. With just a little planning a lot can be achieved. But it all starts with saving and investing. If you have some savings kept aside, the you are already on the right track. However, money not invested never grows. Investing on the other hand lets you get interest and benefits on the money you invest.
The thought of investing brings up a lot of questions. Why should you be investing, how and where follow suit too. Firstly, always remember that the best freedom a person can have is a little money of their own. Secondly, you have to invest in your future. A day might come when you would want to take a long vacation and just travel or you may need money for emergencies. What will you do then if the only money you have is your current salary. You don’t want to go around asking for loans do you? So, how should you save and still earn?
Well, simple- invest your money. It goes without saying that you don’t have to invest all the money that you have kept aside. Start small. Start with a few thousand dollars. Be it 100, 200, 1000 or a whooping $10,000. As a millennial no one expects you to have a lot of money so how so ever much you can spare invest that much only. Let’s say you have these $10,000 and you can invest all of this amount. However, it all depends on depends on your willingness to take risks, your investing strategy, and finally your long-term goals.
Now, after the why and how much, what remains is where you should be investing your money? Let’s go over some key investment vehicles wherein you can choose from short term and long term investing options depending on your current and future needs.
Short-Term (Five- Years or Less)
You are a Millennial and you definitely have your goals and needs set out and you believe in living in the moment. But you should also be focusing on what you want your life to look like when you are 70. Plan your retirement and invest these $10,000. Let your funds grow over several decades and by the time your policies mature and so do you, you will have several hundreds of thousands of dollars. All this money without you having to do anything? This is the kind of investment that needs to be kept untouched.
But maybe you want to access your funds to buy a house, a car, an expensive surgery (god forbid) or want to invest in further education, what should you do then? well, you should invest in a mix of varied investment types so you can preserve savings and see gains and income at the same time. The only shortcoming to short-term investing options is that these don’t receive the same tax benefits when invested in a retirement account such as IRA and 401(k).
The U.S. Government is like the ‘Lannisters’, ‘it always pays its debts’. U.S. Treasury bonds are the most sought after investments for those who want to earn good passive income. These don’t make you rich instantly as the interest rates aren’t too high but they give you the freedom to invest for as low as 30 days or as high as 30 years. And you can take out your money any time you need it.
Such low interest rates do not take your attention? Well, invest in bonds from overseas governments as they pay higher interest rates and corporate bonds give higher returns. But when bonds offer higher returns, their creditworthiness is questioned and they are likely to default too. So, you have to see how tolerant you can be when taking risks. If you aren’t the risky type, then build a portfolio of different bonds and invest in risky and less risky, higher interest rates and lower bonds altogether. Invest in mutual funds. It is the right way.
Peer-to-peer lending is an amazing source for earning passive income. These are less risky and don’t include banks. You simply give your money to places like Prosper and Lending Club. They will then give your money to people who need to pay off their debts or start up a business as a loan. These generally fetch higher returns than bank bonds.
Long Term (Beyond 10 years)
Growth Mutual Funds
It is highly recommended for Millennials to consider investing in mutual funds that consist of growth companies. These include huge blue-chip stocks that cover a wide range of sectors and industries. You can even invest in international stocks through mutual funds. If you manage your mutual fund well, you can earn returns as much as 10 percent or more. All you need to be careful of is the fees/ don’t invest in a fund ratio that has an expense ratio of more than 1 percent.
Buy shares of companies if you don’t mind investing for the long run. Buy shares of companies that have good valuation, have good cash flow and have the potential to grow. Large diversified companies can be great for investing. Choose wisely.
Exchange Trade Funds
Exchange trade funds or ETFs are not much different from mutual funds. However, they trade like stocks. These have become popular amongst Millennials recently and have lower expense ratio than mutual funds.
These are just some of the ways you can invest your $10,000 to make more money in the short and long run. But it all depends on the approach you want to take. Be risky or risk averse. All that matters is that you invest and keep yourself financially safe. Invest in stock, bonds or even your education.
Take care of yourself and your money. Take that much desired vacation soon too. But first, earn a little more money.
Be independent and free, financially.