Investing for Millennials

Shmuel
Shmuel
Sep 3, 2018 · 6 min read

How to invest your money with minimal effort


“No house… no money… just avocado.”

Millennial — Urban Dictionary

The market collapse of 2008 and the gig economies of the past 5 years have setup millenials to be the most financially unstable generation in modern times. Already being labeled the ‘Live Now’ people, millenials need to step out of their comfort zones to think about investing for future financial solvency. Planning for the future doesn’t have to be stressful. There are a number of services that can help you prepare for long term financial success with minimal effort. This article describes a simple 3 pronged approach to investing your money with minimal effort.



Daily Funds

A common mistake that first time savers make is saving money as cash in a generic savings account. People don’t realize that leaving money in a savings account is not only missing out on tremendous potential growth, but can even lower your net worth. For example, Chase pays out 0.01% in interest for savings accounts. This means that if you had $100 in a Chase savings account then you’d make one penny of interest on it each year. Pretty little, right? Even worse is that the inflation rate for 2017 was 2.1%. $100 saved from 2016 to 2017 would only have $98 of buying power due to cost of goods increasing. Saving money as cash in a low interest savings account is causing you to lose wealth.

There are other options for parking your savings. Many online banks offer savings accounts with substantially higher interest rates than brick and mortar banks. This article from MagnifyingMoney.com has a great breakdown of some of the best online banks. Synchrony Bank offers a high interest savings account with 1.85% interest. You read that right, 1.85%, 185 times what Chase offers. It’s necessary to have cash on hand for ‘rainy day’ expenses, so you might as well max out its growth.

Opening a Certificate of Deposit (CD) is another great way to have your cash work for you. CDs will lock up your money until its maturity period (12, 18, 24 months), but offer a higher interest rate in return. Again, Synchrony Bank has great rates here. A 12 month $2000 CD earns an interest rate of 2.40%. This is a great way to have cash on hand, without losing it to inflation.

Edit: As I’m writing this article, Synchrony added a new 13 month CD with 2.65% interest. Be sure to check the current rates before opening a CD.

Note: Many of these banks are ‘no-frills’ and that’s how they are able to offer such good rates. They might not have a very good bank credit card, or other banking perks. I recommend keeping an account open with Chase (or whichever major bank you use) to take advantage of the perks and credit card promotions that they offer, but make sure to park your loose cash in a high interest account.


Short term (5–10 years) growth

Although 5 years seems like a long time, in the investing world of 20+ year goals, 5–10 years is considered short term. With short term investments you want to invest in a low to medium risk investment that can provide decent returns. In general, you should avoid high risk investments in the short term, as they can fluctuate wildly and you may be caught on the wrong side of the cycle when you need to access the money.

In true millennial fashion, let’s identify some low effort, low risk investments.

An eReit (Electronic Real Estate Investment Trust) is a relatively new investment opportunity that allows individuals to invest in real estate. eReits have large portfolio of properties and allow you to own shares of real estate in many different markets. It’s a good way to diversify your investment portfolio, without needing to have the capital to buy entire properties.

Fundrise is an easy online eReits platform that allows you to invest in multiple eReits each with different characteristics. You can choose between 3 different portfolio categories (Income, Growth, or a balance of the two) to find one that suits your needs. In the past 4 years, Fundrise has provided 8–12% returns for its users.

I highly recommend Fundrise as a short term (5–10 year) investment. It’s a completely hands-off investment, and a good way to reduce your dependency on the stock market.

Another great hands-off investing approach is to use a robo-investor. “Robo-investors are a class of financial adviser that provide financial advice or Investment management online with moderate to minimal human intervention.” Replacing a human investor with a computer algorithm reduces the costs associated with these investment platforms

Betterment and Wealthfront are two popular robo-investing service. You simply pick a target date and the computer program will allocate your money in a risk-sensible manner.

I recommend using a robo-investor to gain exposure to the stock market. Personally I use Betterment, but both Betterment and Wealthfront offer a similar set of features, and both have very low fees. Robo-investing is a great low hassle way to invest in stocks.



Long Term

When talking about long term investing two investment vehicles come to mind, 401k and IRAs. Both of these are long term investment accounts that have tax advantages, but the lock up your money until age 55 if you retire then or 70 if you are still working.

If your employer offers a 401k plan with contribution matching then make sure to max out on that (before investing in anything else). The matching contribution is free money for you, and on top of that you can claim an income deduction on your taxes for 401k allocations. Not only will you be saving money for the future, but you’ll be saving money on your taxes as well.

If your employer does not offer a 401k, you can still take advantage of tax saving retirement accounts by opening an IRA. There are two types of IRA accounts, Traditional and Roth. There are specific tax breaks and rules for each one, I recommend reading up on the differences here.

Using a robo-investor for your IRA is a good idea, as it will help your investment grow over time. Betterment offers both Roth and Traditional IRA accounts.


Day Trading

Trading stocks can be fun, especially if you are passionate about a company and want to profit off of its success. Be careful though, the stock market can be volatile and you should only trade as much as you are willing to lose. Always diversify and hedge your holdings to maximize your long term growth.

In order to trade stocks you need to use a Stock Brokerage to buy and sell stocks. Most brokerages have a fee per trade, aka Brokerage Fee. But you can avoid paying these fees by picking the right brokerage to work with.

Robinhood is a no-fee stock trading brokerage with no account minimum. If you want to dabble in stocks I highly recommend this platform. It’s easy to start out with a small deposit and you don’t have to worry about brokerage fees eating away at your balance.


If this post was helpful to you, I’d be very grateful if you’d help it spread by emailing it to a friend, or sharing it on Twitter or Facebook. Leave a comment if you have any other financial tips to share.

Thank you!

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade