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Investing Strategies For 20-Somethings

3 Things Advisers Are Doing to Get Millennials Excited About Investing Again

We're thrilled to present this smart Business Insider story here on Savvy!

It's no big secret that millennials are scared silly at the thought of investing in the stock market.

With employment still sputtering along and home ownership little more than a pipe dream, the so-called graduates of the recession are mainly focused on finding a job and investing in what they need to get by.

"We look at where they are almost similar to a generational thing we saw in the 1930s," said Chris Hobart, a financial adviser. "These investors look at money totally different than their parents did, and they see the stock market as being extremely scary and that the opportunity may not be worth the potential."


This wary outlook has made it harder for financial advisers to lure young investors into stocks and savings vehicles in general, wrote Jane Hodges in the Journal. Advisers are having to come up with new and unique ways to get millennials excited about financial planning, but what's surprising is that many of these tactics aren't all that new to begin with. Here, we outline a couple trends taking hold among Gen Y investors:

Investing like Buffett

Perhaps the biggest step in getting millennials to plan for the long-term is changing their mindset, said Hobart. (See why having the wrong mindset might be keeping you poor.)

"Adopting the Warren Buffett approach tends to get them interested," he said. "The idea is that they should find something that people need or want, understand why they need or want that and then buy it."

Drawing from everyday experience makes the act of investing feel more accessible to millennials, he said. It feels like less of a chore.

Hobart has also found that Gen Y — early 30-somethings included — tends to gravitate more toward privately-owned shares of tangible products such as oil and gas.

"Being a small owner of a small piece of land that produces oil represents a larger value," he said, noting Gen Y's desire for a sense of ownership despite its reliance on the Cloud and social media. "It gives the investment a solid feeling."

For what else is working, keep reading.

Build your own pension

The most surprising trend to take hold among millennials is their embrace of fixed and fixed rate annuities, savings vehicles that provide a fixed rate of return, much like Grandma's Certificate of Deposit.

"With more companies moving away from pensions, a lot of investors in their 20s and 30s like the idea of building their own pensions," said Hobart.

For those who saw their early boomer parents lose their jobs and pension and watch their Social Security prospects all but dwindle, Gen Y wants a guarantee that they won't outlive their income stream. (See how to protect your pension.)

The more popular of the vehicles, fixed rate annuities, provide "an income-generating guarantee" that lets investors enjoy the upside of the market—by paying interest based on index growth—and erasing the downside by not reducing returns when the market tumbles.

Millennials can plan to turn this investment "on" in retirement, which Hobart says is a "nice way to diversify what you're doing" when you're feeling particularly skittish.


Another big trend to emerge in recent years is the souped-up, ultra-personalized portfolio. Though this investment isn't news per se, millennials appreciate the DIY sense they get from creating a folder of investments that suits their interests and goals. (See why you shouldn't play the loser's game in the stock market.)

Once only available to millionaires and those with exceptionally high net worth, now anyone with $5,000 kicking around can choose the investment that suits them rather than blindly opt for six mutual funds that represent whatever the company is trading on.

Tell us: Are you a millennial investor? How did you get started, and what advice would you share with someone just starting out?

Don't Miss These Other Business Insider Stories:

How I Clawed My Way Out of Debt and Paid Off My Credit Card

HIGH DEBT, LOW SAVINGS: How Women Are Really Managing Their Finances

Warren Buffett Will Now Be Taking His Hidden Talent to China

Why Anxious Investors Should Tear a Page Out of Rip Van Winkle's Playbook

Image Source: Getty
Join The Conversation
fdrennan fdrennan 5 years
As a 23 year old what concerns me the most is not having "enough" money, and I would prefer to become financially independent as soon as possible. The majority of my generation, influenced by popular media, believes that wealth involves "making it rain" and buying a bottle of Patron at the club. We are too materialistic. However, instead of pissing my money away I have opened up a target retirement fund in a Roth, saved up an emergency fund, and once I hit my limit, the rest is placed into a standard brokerage with emphasis on consumer staples. I can't say that my way is the best, or that everyone my age is materialistic. I can only say what I have seen at this point in my life, and hope my friends can catch on before they're 55 years old like my mother trying to catch up.
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