“Don’t trust anyone over 30” was the mantra of the baby boomers back when they were, finally, under 30.
Today, people under 30 are genuinely trusting – and in fact have the highest levels of trust in financial services of any generation, according to a survey we have at the CFA Institute. (opens in a new tab) recently released. This is promising news for Gen Z and young millennials as they set out to make prudent financial decisions in their lifetime.
I’m heartened by what these confidence levels mean for young investors, and let me explain why: Gen Z and young millennials, more than any other generational cohort to date, need to “own” their financial future. Whether it’s paying for their education, buying a home or funding their retirement, they are largely on their own, and higher levels of trust in financial services will help them form an informed and unbiased opinion. about these life-changing decisions.
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When I started my career transition into finance, after starting out in marketing, I was determined to continue my education in order to excel. This led me to find available tools, references and mentors. I see many of these same stocks being mirrored by young investors looking to chart their own course right now.
But how can young investors continue to grow their investments in a way that also continues to increase their confidence? Here are three key ways for young investors to start building a portfolio that’s right for them.
Invest in their own principles
This generation wants to make an impact, and many choose investments based on their own personal values. Environmental, social and governance (ESG) considerations have increased exponentially among Gen Z investors, which has also boosted confidence.
Many Gen Zers seek to invest in companies whose principles and sense of purpose resonate with them. This contrasts with a returns-oriented approach. And when they feel they can invest their money alongside their values, there is a correlation with growing confidence in the investment process. Not to mention that these considerations are often important to the performance of individual companies.
Advice to investors: Young investors must distinguish their main convictions and formalize them. By listing priorities and standards, they can then strategically implement them as part of an investment strategy. Researching individual companies or finding funds that set these standards for them can help create an investment mix that correlates to their own value system and, in turn, helps ensure that those values are reflected in our financial system. .
Adopt the technology
We also found technology to be a “trust multiplier.” Technology builds trust as it provides more transparency, simplifies access to markets and products, and can better align product offerings with investor needs through personalization. Those in their 20s are digital natives, so they often use new tools to find financial information and better understand their investments. And that familiarity leads to higher levels of trust for them.
Savings and investing apps are fundamentally changing the way Gen Zers and Millennials manage their financial lives. Although sometimes mobbed for the “gamification” of investing, these tools, when used correctly, bring a host of benefits. We found that those under 35 are almost twice as likely as those over 65 to have a retail trading account (68% vs. 37%, respectively).
Continuing to embrace this curiosity for finance will give them greater access and understanding of their finances. But, to get the most out of technology, they need to take the time to understand which tools are the best and most reliable.
Advice to investors: New apps and tools continue to make getting to the markets easier than ever, especially for those just starting their investing journey. Young investors and those looking to get started with investment apps should search online for reviews of the best apps available for their specific investment goals, whether individual stocks or group investments. larger portfolios, to ensure they get the best advice when making their investment decisions.
Work with those they can trust
Despite the increased use of trust-enhancing technology, our research revealed that there is still a need for human guidance. Even the most tech-savvy young investor sometimes needs the advice of an ethical, well-trained professional.
Many young investors already work with an advisor, but they shouldn’t settle for the first one if they don’t seem to consider what interests them. They should seek to ensure that they follow the beliefs they have formalized and that they invest in their best interest.
Advice to investors: Young investors should take the time to find the right advisor to work with. This should include preparing questions about their fiduciary status, fee structure, and investment strategies, to name a few. And as we mentioned, ensuring advisors’ values are aligned with their personal investment philosophies is a critical step to a thriving long-term partnership.
I applaud Gen Z and Millennials, and hope they continue to embrace the tools and technology that can make them confident, informed, and passionate investors for life.
This article was written by and presents the views of our contributing advisor, not Kiplinger’s editorial staff. You can check advisor records with the SECOND (opens in a new tab) or with FINRA (opens in a new tab).
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