The good thing about being a Millennial is that we’re tech-savvy. And being tech savvy has its benefits when it comes to making money as we have access to more resources to develop a side hustle or invest.
However, baby boomers tend to be better savers than millennials, and they also seem to put more emphasis on the importance of investing for the future, along with prioritizing debt repayments.
It’s been found that almost 60% of millennials are more likely to spend money on experiences (concerts, eating out, traveling, etc.), and sometimes spending money on experiences can rack up and lead to debts. However, if millennials started investing and saving a little bit earlier, they could be a lot more prepared for their futures.
The Importance of Responsible Long-Term Investing for Millennials
A 2016 study done by the Responsible Investment Association found that 82% of millennial investors believed that within the next 5 years responsible investment would become a priority for more millennials. Without knowing about the pandemic, of course, they were right. The pandemic has led Canadian millennials to focus more on their finances.
Long-term investing is a great strategy to earn maximum returns at minimum risk. It will also build future wealth and improve your financial health.
Inevitable Money Growth
This strategy involves utilizing the money you have saved up to buy income-producing assets, such as dividend stocks, and then holding these assets for longer periods of time. Investing in the long-term allows people to look past short-term market volatility.
Also, letting your money stay invested for a long time (10+ years), gives you the power of compounding (which involves reinvesting an asset’s earnings from capital gains or interest to generate more earnings).
It’s important to note that your money won’t just grow without you doing anything. You will have to continue to reinvest the dividends without touching your capital at the same time.
It’s also important to know what assets to buy, what strategy to use, and for how long to hold them.
Buying and Holding Forever
An example of a stock that fits within this strategy is the Toronto-Dominion Bank (TSX:TD) (NYSE:TD), which was the only company that was able to keep steady revenue and earnings growth during the 2008 financial crisis.
The $156.57 billion bank pays a 3.67% dividend and keeps a less than 50% payout ratio. If you bought $75,000 worth of shares today ($86.10 per share) and held it for 2 decades, your money would grow to $154,213.80. If you held the shares for 3 decades, the money would grow to $221,133.34!
Uncertainty into Guarantee
Long-term investment strategies should have long enough time frames to convert uncertainty into guarantees. Millennials have good chances of becoming millionaires because time is on our side. Financial independence for many of us is not far away. However, Millennials must focus on long-term strategies to set themselves up for their future.
At Investors scene, we’re here to help you get the most out of your investments. Check out our other blogs for more insights to help you meet your investment goals.