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Millennials are now at an age where it’s important to think about the future and funding their retirement. It’s time to find more opportunities to generate and maintain wealth, and starting as early as possible is essential to ensuring a comfortable future. Here are 6 common options for Wealth Creation for Millennials to get you started:
6 Options for Wealth Creation for Millennials
Investing is a powerful wealth-creation tool. A considered and well-researched wealth creation strategy can give you the financial means to have choices in your life and choose your own path. However, when it comes to making those all-important decisions on where to invest, there are several key factors to take into consideration. These include tax implications, risk tolerance and diversification.
Superannuation is one of the most common forms of retirement investment vehicle available to Australian millennials. Your superannuation funds are the most important sources of money you’ll have in retirement as this will need to fund your lifestyle once you stop working.
To invest in superannuation, your employer will contribute 10.5% of your gross eligible earnings into your nominated superannuation account on your behalf. If you have additional cash flow, you can also make additional personal contributions and reap the benefits of compound interest. Any funds received into your superannuation account will then be invested into assets in accordance with your investment profile.
If you make smart decisions with your superannuation now, you can have a positive impact, improve your financial situation in retirement, and potentially minimise your tax – thanking yourself in the long run.
2. Exchange-Traded Funds
An exchange-traded fund (ETF) is a type of investment fund that tracks a basket of assets, such as stocks, bonds, or commodities. ETFs are traded on stock exchanges and can offer investors exposure to a wide variety of asset classes which can help an investor to diversify with low starting capital and at a lower cost.
The 2020 ASX study found that 17% of Wealth Accumulator investors currently held ETFs in their investment portfolio.1
A share is a portion of ownership that you have in a company. Its value depends on several factors, such as the company’s earnings, future growth potential, industry trends, and economic climate. As share prices can be volatile, they are typically viewed as long-term investments.
When you purchase shares, you are purchasing a part of the company and will be entitled to the dividend if there is any. There’s no certainty that your invested amount will increase – the potential returns depend on the company’s future performance.
Australian shares are the most popular investment for Australian investors.2
4. Managed Funds
Managed funds are investment funds that a professional fund manager runs. It is a cost-effective way if you want to manage your money and diversify your portfolio. This is a suitable option if you have a low or moderate amount to invest.
Managed funds are designed for investors looking to outsource the selection process to a Fund Manager and are happy to leave their money in for a long time without necessarily knowing what individual shares or companies they are investing in. They work by investing in hundreds or thousands of shares all at once.
5. Peer-to-Peer Lending
Peer-to-peer lending is the newest form of investment for millennials. It is a platform that enables individuals to lend money to each other. When you lend money to individuals, you invest in that person’s future.
The good thing about peer-to-peer lending is that you get to know the person you are investing with. You can also check the credit scores of the person you are lending to and see how they handle debt. Moreover, you can also choose to lend only to people with good credit scores to minimise the risks.
However, peer-to-peer lending is not covered by the Financial Services Compensation Scheme. So, if a borrower is unable to repay their loan, the lender will suffer a financial loss. Additionally, if you want to get your money back during a loan agreement you are likely to have to find another lender to take on the loan, which could be difficult.
6. Real Estate
Real estate is a popular form of investment because it is tangible, and you can see and feel it. However, you need a lot of money to invest in real estate. It is the type of investment you can use to build passive income since you can rent the property and have tenants pay the bills.
Investing in real estate can come in the form of residential, commercial or property trusts. Ideally, you should consider the purpose of your investment to live in, rent out, future development or just a long-term hold with a passive income (rent) and hopefully gain capital growth over time.
Millennials! Start Your Investment Portfolio Today with Coastal Advice Group!
It is imperative to plan your financial future as early as you can. The earlier you start, the better it is. These are only a few of the investment methods available to millennials. You can choose a combination of the options that suit you best to help build a healthy, diversified portfolio.
At Coastal Advice Group, our team of experienced financial advisers are here to achieve wealth creation for Millenials. Talk to an experienced financial adviser to learn more about which investment choices might be right for you, your objectives and your personal circumstances. We have offices located in Newcastle, the Central Coast, Sydney, Port Macquarie, and Byron Bay. Call us or book online to secure your complimentary first appointment with us today and get started.
DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.