In today’s fast-pace and ever changing age, do-it-yourself (DIY) investing is more important than ever. And DIY investing is certainly even more important than ever when it comes to investing for your retirement. Why is that the case? Employers have overwhelmingly abandoned pensions in favor of the 401(k) account (see glossary), which puts more of the onus on you to invest and save for your retirement.
Americans, and Millennials in particular, will need to rely almost exclusively on their 401(k) income to fund their retirement. (If you don’t take the time to learn about 401(k) accounts and investing, you could wind up living off of what are to be meager, if any, Social Security benefits.) Learn the ins and outs of investing yourself and you’ll rarely, if ever, be left out on the bench.
With this in mind, here are 3 reasons why DIY investing is so important for Millennials:
- You gain financial empowerment. As you begin to build your DIY investing knowledge and skills, you will start to have an emerging sense of empowerment. What is empowerment? Empowerment is an internal sense of having control and influence over what happens in your life. Through building your DIY finesse, you’ll no longer feel helpless having to live paycheck to paycheck, or fretting that you can’t pay your credit card bill in full, or loosing sleep knowing that you might not be able to retire with dignity and comfort. Through DIY investing, you control what happens to your financial life today and beyond until you reach a state of financial security.
- Saves you money and increases portfolio returns. You will save money and increase your portfolio investment returns when you are a DIY investor. How so? You’ll save money on avoiding financial advisor fees since you won’t need one in your 20s/30s because you’ll be able to construct a diversified and low-cost portfolio of your own by flexing your DIY knowledge. (More details on portfolio construction in a future post.) True, you can’t control what the stock market is going to return, but with these offset expenses you’ll save more over the long-term, leading to more money in your pocket.
- It’s fun! Investing on your own is a lot of fun. As you begin to learn more about investment accounts (i.e. 401(k)s, IRAs, etc.), investment products (stocks, bonds, mutual funds, ETFs, etc.) and investing in general, you’ll start to build a sense of delight in your newfound knowledge. It will be enjoyable to design your investment portfolio, choosing what and how you want to invest your hard earned money in. And after time as your account builds, it’ll be fun to see how much your money grows!
These are 3 reasons why DIY investing is so important today, and especially for Millennials, who will most certainly be the first generation who needs to take complete ownership and management of their financial futures.
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Want to learn more? Pick up a copy of my book …
From Millennial to Millionaire: DIY 401(k) – 5 Do-It-Yourself Steps for the Digital Generation to Design and Manage their 401(k) on Amazon.
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- Pension – A retirement plan in which an employer guarantees to pay an employee a defined income after retirement. This retirement plan is no longer mainstream in the modern workplace.
- 401(k) – A retirement plan in which the employee has the flexibility and choice to invest in a pre-selected menu of investments. The account is tax-advantaged because earnings grow tax free as investments appreciate over time, and usually the employer will provide a matching contribution. The 401(k) is the preferred retirement plan in the modern workplace.