Millennials and their finances
It’s back to the good old days in 401k-land, once again. Your company is doing well, and you may have even received a raise this year. If you’re fortunate, you have a company retirement plan and your company matches a portion of your salary contributions. Maybe you’re a business owner with your own plan, and you’re pretty glad you chose to start contributing a few years ago.
The market is going up and has been for a while. Your contributions and the power of compounding have resulted in your balance looking better and better by the day. Some days you’re downright excited about it. The market is up, your company stock is flying, and you have more money! At this rate, you’re going to retire in no time, you think to yourself. But then maybe the financial markets have a bad couple of days, and the fear sets in. This isn’t as easy as you thought, and maybe things aren’t so rosy.
Do you buy more shares in case it keeps going up?
Do you sell in case it doesn’t? Money has the ability to create emotions in us which almost nothing else can. If you’ve asked yourself these questions, you’ve experienced this phenomenon, and you’re not alone by any means. The roller-coaster ride of emotions around money and what it buys is common. It can make us forget that this is a long-term, slow and steady game, not a slugger to center field with a slide in to home base. This emotional fluctuation can be the catalyst for some of the worst decisions a person can make.
With that in mind, let’s get back to your retirement accounts. Do you stop contributing? What if the market goes down from here, wouldn’t that be terrible? This question is pretty common, and the answer is easy.
A dream come true
For those this article is directed at, the answer is a resounding “No”. For you -the Gen Y or millennial investor- a flat, volatile, or downward trending market over the next few years could be a dream come true, even if it’s a dream you never had. Let me clarify that I am not wishing another extended stock market decline on anyone. If you happen to be close to retirement age and reading this article, you have hopefully taken the necessary steps to protect yourself from risk and can withstand such an event.
The fact is, if you are not close to retirement, then you want (or should want) the stock market to slow down, flatten out, or go down at some point in the future. A decline is characterized by persistently lower prices. Lower prices mean that you get to buy more shares of stock with each dollar you invest. Chances are that you have heard this referred to as dollar-cost averaging.
Simply put, the idea is that buying at regular intervals will have you buying some shares at higher prices and some at lower. This will theoretically improve your probable average purchase price, particularly in a down market. The key is to make consistent periodic purchases and keep going.
Without going further into the details of dollar cost averaging, let it serve as a simple reminder to be conscious of the emotions that tend to cripple young people when investing, and of the rational decisions that can help you avoid such pitfalls. Taking advantage of dollar cost averaging is one of the rational decisions you can make, since it is based on mathematical logic, not greed or fear. A downward market and a struggling economy cause fear, and most people have difficulty managing their financial fears. For young investors, this fear is less rational and can be a real handicap. This makes it that much more important to have a logical plan to stick to so that fear doesn’t affect your course.
Of course, we are only human, and we have witnessed a lot of chaos in the last decade. After watching many of our parents get hurt in the market just five years ago, we young people are understandably hesitant. Many baby boomers have had to continue working or return to work.
But guess what? Those of the baby boomer generation who were hesitant to save and invest in the 1980’s often didn’t fare as well as those who had an investing plan early on and followed it. Those who waited to see how things panned out found themselves starting to invest in the late 1990s to early 2000s, now with other emotions driving their behavior. Realizing they were somewhat behind, they wanted to be more aggressive. Seeing that the stock market had been charging full speed ahead, they were caught up in the expectation that it would continue without end. For many, this led to more aggressive decisions, also based on emotion.
Leave emotions out of it
Those who maximized savings and began investing early were able to be aggressive early on knowing that a long time span to retirement was on their side. As they got older they were able to focus more on protection and additional diversification. Some of them were still aggressive late in their careers and felt some pain during 2008 and 2009. Some were led to believe they were being conservative while they weren’t, but that’s another article. The point is that by beginning early, even their painful losses still left them better off relative to those who started late and needed to catch up.
You cannot afford to be emotionally over-aggressive when you are near retirement. Start when you are young, develop a plan, stick to your contributions, and try to leave emotions out of it. When you’re 30 years out from retirement and the market is down, you can remain calm and be thankful for a potential opportunity. Let the talking heads on CNBC say what they will. You have a plan, and you want some cheap shares.
Disclosure: Past stock market performance is not indicative of future results, and there is potential for loss of principal. You should consult with a financial professional as it relates to your own personal financial situation before acting on any investment. Daniel Larsen is an Investment Adviser Representative of and Advisory Services offered through WFG Advisers, LP and a Registered Representative of and Securities offered through WFG Investments, Inc., Member FINRA/SIPC.
A tiger shows its stripes: The growth of Tiger Global and their investments
(BUSINESS FINANCE) Tiger Global has been acquiring a load of tech companies – let’s talk about who they have and how they’ve been so successful.
In 2003, Tiger Global was founded by Chase Coleman who began his career at Tiger Management (brilliant name choice). In the ensuing years the investing firm expanded to include private equity and venture investing. Today it’s hitting the charts at $65B with its employees (number at ~100) being the firms’ biggest shareholders.
Earlier this month, Tiger Global raised one of the largest pots of VC money ever recorded, coming in at $6.7B. These came from a list of occurrences and investments.
- Roblox: A sandbox gaming startup, Tiger Global owned 10% when it went public in March and the value is hitting ~$38B+
- Stripe: A fintech firm Tiger Global leaped onto this investment when Stripe announced a $600m rise in value at a $95B monetary evaluation of the company.
- M&A wins: In 2020, 3 portfolio companies (Postmates, Kustomer, & Credit Karma) of Tiger Global were acquired in billion-dollar deals.
The tactics that Tiger Global stands by are well documented in a few different locations. One of the biggest that they push is speed. The deals that fly across their tables are completed in just 3 days, far outpacing other firms. When you are an investment firm hour are a time between success and failure. To keep up with these ideas, they have a pre-emptive approach to startups. Doing thorough research and throwing money at people before they even start looking for it. Knowledge is power and this lets them get their foot in the door faster than anybody else.
Resources and a monstrous war chest are 2 of the other factors that they set their claim to fame on. The numerous portfolio companies have high-priced consultants thrown at them for advice on a regular basis. These consultants just add to the success of the companies and keep things building. Where does this money come from? The stakeholders. The mountainous mounds of money that this firm keeps on hand is matched very few in the world. Scrouge McDuck would be hard pressed to keep up with these guys.
They also keep to long-term holdings as an approach to their methods. Unlike traditional VCs, Tiger Global operates public market hedge funds which provides price stability for startups since it doesn’t have to distribute funds after an IPO, unlike traditional VCs.
In the first quarter of 2021 Tiger Global has closed 60 deals, keeping with their hit the ground sprinting approach. They have bids on a number of different companies already as well (ByteDance, Discord, Hopin, & Coinbase). At least one of these reaches a value into the tens of billions. This company is set to be one of the fastest growing groups in the globe. Who knows where it will stop? Let’s wait and see, or join. Whatever hits your fancy.
India bans cryptocurrency prior to releasing their own
(BUSINESS FINANCE) India is potentially planning to ban cryptocurrency — and instead, they’re planning to introduce their own version of it for purchase.
Owning mainstream cryptocurrency these days is a bit like owning a pair of Crocs: Potentially lucrative (especially if you’re Post Malone), but mostly just weird. A recent report shows that India is planning on adding “illegal” to that list, possibly ahead of launching their own cryptocurrency in place of the banned ones.
The proposed law would also fine anyone found trading—or even simply owning—banned cryptocurrencies in India. Mining and transferring ownership of cryptocurrency would similarly warrant punitive measures.
CNBC notes that this law would be “one of the world’s strictest policies against cryptocurrencies” to date. While some countries have imposed strict laws regarding things like mining and trading cryptocurrency, India would be the first country to make owning it illegal.
Some talk of jail time—including sentences of up to 10 years—for cryptocurrency owners and users was floated by Indian lawmakers back in 2019, but there is no explicit indication that those terms would be present in this rendition of the bill.
To be fair to the lawmakers involved here, the bill wouldn’t be as cut-and-dry as “has bitcoin, gets fined.” According to the CNBC report, people who own cryptocurrency would be able to “liquidate” their earnings for up to six months preceding the bill going into effect. This would theoretically allow investors to hold onto their portfolios for a bit longer before having to cash out.
But that leniency might not matter anyway. It doesn’t take a genius to see that this move could do two dramatic things to the cryptocurrency market: Add yet another niche option for investors, and destabilize every other pre-existing cryptocurrency option—or, at least, make them less stable than they already were.
In fact, the simple introduction and threat of this bill could be enough for the cryptocurrency market to take a nosedive—something that can’t be discounted as a factor in making this decision. Current reports put Indian-owned bitcoin values at roughly $1.4 billion, though, so it’s clear that the bill hasn’t had a deleterious effect at this point.
The fact that India’s central bank has plans to introduce a government-sponsored cryptocurrency of their own cannot be separated from this bill, either. While the official government position is that blockchain is to be trusted while existing cryptocurrencies are eschewed and dismissed as “Ponzi schemes”, it’s clear that at least part of this bill is motivated by a desire to thin out the competition.
Which generation has cried the most over money?
(BUSINESS FINANCE) Financial stress is tough on everyone. Here’s who has cried the most about money woes, and a few tips on how to alleviate some of that stress.
There’s been serious critique in the last several years about the educational system and what basic knowledge young people should be taught in the United States. Home Economics (Home Ec) comes to mind (everyone should probably know how to cook or sew a button), as well as financial literacy.
There are many young Americans who grow up not really having a deep understanding of budgeting and fixed and variable expenses… But it may not be their fault. Perhaps, Mom and Dad (or other guardians) have always been paying for all of their expenses, making sure they had a roof over their head, clothes on their backs, and food in their fridge. Because, that is what you’re supposed to do as a parent, correct?
So, while there’s no reason to blame anyone, often the process of learning what it costs to live and pay your bills is a rite of passage.
The current state of debt and financial fears also doesn’t mean that Millennials and Gen Zers weren’t educated around savings or working. Many young people have had part-time jobs (although much less in comparison to Gen X or Baby Boomers) but they may also be able to use the majority of that income for discretionary spending – which never created room for feelings of lack when they didn’t have to pay rent or a mortgage.
This scenario can ultimately create a challenge when you are finally out on your own and now have student loan debt, credit card debt, utility bills, and required car insurance. Especially if you are young person moving to a big city for exploration and/or new opportunities, where the cost of living can be quite high.
If you are feeling nervous or sad around finances, you are not alone. If you have cried over your personal balance sheet or your bank statements, you are also not alone. According to yahoo!money, a recent online survey of 1,004 Americans by CompareCards.com found that “7 in 10 Americans said they have cried about money in their lifetimes. Many cited worries over their job or making ends meet. Younger Americans appear the most vulnerable to financial tears. About half of millennials and half of Gen Zers said they cried at least once in the past month over money.”
So how can you cry LESS about money? Well, the first thing is to not be too hard on yourself. But you will also want to create a plan that works for you. Each person deserves financial freedom and not a bank statement that makes them cry on the regular.
Here are some financial literacy resources that may help you figure out how to navigate your way out of crippling debt.
Dave Ramsey Books – The Total Money Makeover – A Proven Plan for Financial Fitness
Bravely Go with Kara Perez – Feminist economics + inclusive personal finance
Debt Relief Programs – you’ll have to do your research but there may be a program that is right for you and an agency that can help you set up a realistic payment program for you
Student Loan Forgiveness – it is worth looking in to your options if you are feeling overwhelmed with student loan debt and there may be ways for your loans to be forgiven
Financial Advisor – consider working with a professional that can help you with your budgeting, investing and retirement savings/funds
And you may still cry because this is big adult stuff… But hopefully you trust yourself to do the research, explore, ask, and find options that work for you to gain a little more control over your financial situation.
If you are not already doing so, it may be as simple as starting with a budget to better understand your income and outgoing expenses. Being informed can help you to plan better for the future and make you feel less like crying.
Opinion Editorials3 days ago
3 things to do if you *really* want to be an ally to women in tech
Opinion Editorials1 week ago
Questions you wished recruiters would answer
Business Entrepreneur4 days ago
15 tips to spot a toxic work environment when interviewing
Business Entrepreneur1 week ago
Zen, please: Demand for mental health services surges during pandemic
Opinion Editorials3 days ago
4 simple tips to ease friction with your boss while working remotely
Opinion Editorials2 days ago
Why robots freak us out, and what it means for the future of AI
Opinion Editorials1 week ago
6 skills humans have that AI doesn’t… yet
Business Entrepreneur1 week ago
This startup makes managing remote internships easier for all