In my role as an independent financial advisor, I meet with young professionals – millennials – who want to begin an investment strategy. New to the field of investment, many expect to see their money grow, to build wealth. I have to remind them that there are no guarantees. In fact, there are times when, instead of optimized returns, they may experience losses or slow growth.
Every investor should be acutely aware of the relationship between financial risk and monetary return. No matter what your age or circumstance,
My best investment advice for millennial investors includes five strategies to handle the risk in financial planning:
1. Your Risk Profile
We all have a different comfort level with risk. An investment plan that requires too much risk for your financial well-being may not be the best strategy. The key is to achieve the right balance between risk and return. To know yourself well - understand your risk profile and capitalize on your strengths - can increase your chances of success.
Have you got the right amount of insurance? For example, an unexpected event such as death, disability, or other personal loss, is certainly not something for which you can easily plan. Yet, the financial ramifications can be staggering—not only to you but your family, as well. Insurance, in all its varied forms, is simply a method for managing risk.
There are two kinds of savings to consider – long-term or retirement and emergency. Make sure that an emergency fund is an item in your budget and set aside a portion of every paycheck. The rule of thumb is that an emergency savings fund should cover three to six months’ worth of living expenses. Take advantage of any employer-sponsored retirement accounts. Commit to a 52-week savings plan. Even small amounts deposited on a regular basis will add up over time.
4. Debt and Credit
Debt isn't always bad. Having debt—and paying it off—is beneficial for your credit score. A high credit score will make it easier for you to buy a house, a car, or get a bank loan. Without debt, you could never prove to creditors that you are trustworthy. If you are on time with payments, including student loans, then you have nothing to worry about.
5. Your Health
Did you know that the most common cause of bankruptcy is ill health? Don’t wait until it’s too late to keep fit and stay healthy. An early and ongoing commitment to a healthy lifestyle is a good strategy for maintaining overall well-being. Make sure that you have adequate health insurance to cover the cost of medical care.
When it comes to financial investments, no single solution works equally well for everyone. An independent financial advisor in DC can be a trusted ally to facilitate putting a sound financial plan in place today to help you have a more secure tomorrow. Have questions? Get in touch today!
Material discussed is meant for general illustration and/or informational purposes only, and it is not to be construed as investment, tax, or legal advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice.