The coronavirus crisis has unsettled every age group, as we are all worried about our health and that of our families and communities. And if you’re in the millennial generation, generally defined as anyone born between 1981 and 1996, you might also be concerned about your financial future, given the sharp decline in investment prices.
How should you respond to what’s been happening?
Your view of the situation will depend somewhat on your age. If you’re an older millennial, you had probably been investing for a few years when we went through the financial crisis in 2007-2008. And you then experienced 11 years of a record bull market, so you’ve seen both the extremes and the resilience of the investment world.
But if you’re a younger millennial, you might not have really started investing until the past few years, if you’ve started at all, so you’ve only seen a steadily climbing market. Consequently, you may find the current situation particularly discouraging, but this is also a lesson in the reality of investing: Markets go down as well as up.
But no matter where you are within the millennial age cohort, you might help yourself by taking these steps:
Enjoy the benefit of having time on your side. If you’re one of the younger millennials, you’ve got about four decades left until you’re close to retiring. Even if you’re in the older millennial group, you’ve probably got at least 25 years until you stop working. With so many years ahead, you have the opportunity to overcome the periodic drops in investment prices, and your investments have time to grow. And, of course, you’ll be able to add more money into those investments, too.
Invest systematically. The value of your investments will always fluctuate. You can’t control these price movements, but you may be able to take advantage of them through what’s known as systematic investing. By putting the same amount of money at regular intervals into the same investments, you’ll buy more shares when the share price is lower – in other words, you’ll be “buying low,” which is one of the first rules of investing – and you’ll buy fewer shares when the price rises.
Over time, this strategy can help you reduce the impact of volatility on your portfolio, although it can’t ensure a profit or protect against loss. Plus, systematic investing can give you a sense of discipline, though you’ll need to consider the ability to keep investing when share prices are declining.
Focus on the future. You’re never really investing for today – you’re doing it to reach goals in the future, sometimes just a few years away, but usually much further out. That’s why it’s so important not to panic when you view those scary headlines announcing big drops in the financial markets, or even when you see negative results in your investment statements.
By creating an investment strategy that’s appropriate for your risk tolerance and time horizon, and by focusing on your long-term goals, you can develop the discipline to avoid making hasty, ill-advised decisions during times of stress.
As a millennial, you’ve got a long road ahead of you as you navigate the financial markets. But by following the suggestions above, you may find that journey a little less stressful.