Building your trading portfolio: smart strategies for millennials

A generation swept by ‘hustle culture’ that knows of the financial upheavals caused by the Great Depression, the Recession and the COVID-19 pandemic is always keen to make a quick buck like with crypto. However, investment is not a common vocabulary among millennials, even though this is the generation that needs to invest the most. It is time these future retirees want to look at their financial investments to boost their retirement funds.

Why investing early makes so much sense

Start investing early

Want to know a secret? The right time for you, as a millennial, to invest is when you start working. Start a retirement plan, either by yourself or with your company, to help compound the savings for the long term. It can be as simple as earmarking a part of the compensation to an account.

Leverage technology

The availability of online trading platforms has made investing convenient for millennials. Given the love for everything digital, it is wise to enjoy the benefits of online brokers and financial planners for asset allocation and stock-picking tips.

Understand your risk tolerance

As millennials, you have access to time and do not have the responsibilities you would when you grow older, like owning a house or having a child. Therefore, when you begin saving young, you would most likely have more cash available for investments and a longer time horizon to watch your investments grow.

Diversification

When you start building your trading portfolio, never put all your eggs in a basket. Plan your asset allocation to cover a broad spectrum of market categories. While the best way to diversify is through an index fund, you can also look into U.S. treasury bonds for long-term financial investments for safe and higher return rates.

Strategies to maintain your trading portfolio

Whether you subscribe to online trading or go about the traditional way, maintaining a trading portfolio is a primary component of your trading journey. Of course, it can vary for people based on their assets, preferences and risk tolerance. However, some smart strategies that every millennial investor can rely on are discussed below.

Keep your costs under control

Investments should not be a costly affair. Like any purchase, check out a brokerage firm that gives you discounts, offers and low fees. You can connect with such firms, many of which offer online trading and have low fees. As millennials, since you have the option and the opportunity to invest long term, you can just let your investment be. Avoid buying or selling your stocks based on the market’s trajectory. This saves you commissions and management fees, and it may save you money if the value of your stock falls.

Asset allocation and rebalancing

Invest a set portion of your portfolio in indices, growth stocks, dividend-paying equities and stocks with higher risk but higher returns. (You have the time and chance to take higher risks at this point). However, make sure to rebalance your investment portfolio when market alterations change your original allocations. You can achieve this by changing your financial stake in each category to correspond to your initial percentage.

Look into tax considerations

Wealth accumulates more quickly in a tax-deferred account (like 401(k) in America) than it does in a portfolio with a tax liability. But remember that you must pay taxes on the amount of money you withdraw from a tax-deferred retirement plan.

Smart Beta ETFs

A smart Beta ETF is a form of an exchange-traded fund (ETF) that chooses investments to include in the fund portfolio using a rules-based system. Smart Beta does not use the conventional cap-weighted index approach. Instead, it considers minute details that are unique to a given business or sector. A smart Beta fund aims to combine the advantages of passive and active investment methods. The objective is to get a substantially greater alpha while maintaining lower costs than conventional investing options. Millennials respond well to smart Beta ETFs because they provide exposure to a portfolio of equities for a small fraction of the cost and have several advantages over direct investing.

Be a regular and disciplined investor

If you inculcate the discipline of investing early on, online trading and wealth accumulation in the future could become easier for you. Moreover, when job security is constantly at risk, these financial investments can be a safety net for unprecedented times.

Even if you are new to investing, online trading and endless resources available digitally are there to guide you to invest right. Plus, you can keep learning about investments and various ways of investing before and after your retirement, but the first step to getting started is investing, and there is no better time to do so than now!