The Great Millennial Sell Off » Audio Archive » MoneyWise

The Great Millennial Sell Off

MoneyWise

Christian talk radio with Rob West

October 31, 2022

Wall Street is a scary place these days, and that’s all the more reason to have a solid investing plan in place. But one group of investors is letting emotions triumph over planning. We’ll talk about that today on MoneyWise. A recent survey by Ally Financial revealed that almost half of millennials (roughly aged 25 to 40) have sold investments during the past volatile year. The poll also showed that other age groups for the most part have stuck with their investing plans. There’s an old joke that the best investment advice is, buy low sell high, but millennials don’t seem to have gotten it. For most people, now is a good time to buy, not sell. Certainly there’s been a lot of bad news this year to scare investors. We’re enduring the highest inflation in 40 years, the Russian invasion of Ukraine, and the Fed is raising interest rates seemingly on a collision course with recession. Those bleak reports have apparently affected millennials the most, as 49% of those surveyed in August said they’d sold stocks over the past 12 years. That’s compared to just 21-percent of investors in the demographic we know as Gen X (roughly, age 42 to 57). Interestingly, still fewer investors outside those two groups, Gen Z (ages 18 to 25) and some baby boomers (ages 58 to 67) sold stocks in the past year. WHY THE MILLENNIAL SELL-OFF? So why are millennials selling off to a far greater extent than other age groups? And remember. Well, it could be that they're under more financial strain than others. This might include trying to buy a house, and skyrocketing home values in the past year haven’t helped there. Or, they could be facing more expenses raising children or caring for elderly parents, who may not have put away enough for retirement. But even if millennials are selling stocks for what might seem to be the right reasons, it’s still the wrong time to sell if you’re following a long term investing plan and looking ahead at least five years, if not 10. For those folks, a bear market is a good thing. A BEAR MARKET CAN BE A GOOD THING That’s because of dollar-cost-averaging, and it’s something that most investors should be doing. When you contribute a consistent amount each month to your retirement account, you’re automatically dollar cost averaging. That could be in stocks, mutual funds or whateverand you do this no matter what the market’s doing. This eliminates all the guesswork. You’re not trying to figure out what the market is likely to do next month or next year. You’ve already made an investing decision based on a long range plan. And this is following one of God’s financial principles, found in Proverbs 21: 5, Steady plodding brings prosperity; hasty speculation brings poverty. This might seem like a mindless way to invest, but it isn’t. It’s actually very smart. That’s because by contributing a consistent amount each month, you’re automatically buying fewer shares when prices are high and stocks are expensive. But then when stocks are down, and you still invest the same amount each month, you’re buying more shares. So no matter what happens on Wall Street, you’re always building maximum equity at minimum cost. Dollar cost averaging doesn’t give you big wins overnight. It gives you long term gains. And if you stick with it and don’t pull your money out when things look bleak, those gains can be substantial. Let’s say a bear market lasts 6 months, a year, or even longer. With dollar cost averaging, you’re laying the foundation for significant gains down the road. When the market recovers, all those extra shares you bought when prices were low will be worth moregreatly increasing the value of your portfolio. BEWARE OF EMOTIONAL INVESTING DECISIONS Most of us work pretty hard to save and invest. It’s just human nature to have some emotional attachment to those dollars. But emotions are dangerous when it comes to investing. They tend to crowd out logic and reason. Dollar cost averaging takes the emotion out of investing. It eliminates the possibility that you’ll make a bad investment decision, like selling when the market’s down and locking in your losses. Or buying more when stock prices are high. It forces you to think long term instead. So if you’re a millennial investor or any investor for that matter stick to your long range plan and don’t let your emotions take over. On today’s program, Rob also answers listener questions: ● Does it make sense to sell property to eliminate credit card debt? ● When is it wise to hire a financial adviser? ● When is it too late to take on a mortgage?

Loading the player...

You Might Also Like