Investor Education

Gen Y: The Next Generation of Investors

Published

9 years ago

June 5, 2014

Jeff Desjardins

Gen Y: The Next Generation of Investors

Move over Baby Boomers, the next generation of investors is here and they plan on doing big things.

With Gen Y youth (born between 1981 and 2000) coming to an earning stage of their lives, it is worth noting that they behave differently from investors of the previous generations.

Gen Y, also known as Millennials, have grown up with the abundance of quality and timely information always within an arm’s reach. Young investors today use multiple sources of information that were not available to previous generations to make informed financial decisions. Therefore, investors of this era have become more independent and are inclined to perform research for their investments and finances on their own.

Side note: This is why we created Visual Capitalist. We want to inform the modern investor as quickly and efficiently as possible as they are inundated with a myriad of information every moment of every day. We believe visual learning is the best way to consume and retain useful information.

As Baby Boomers, and eventually Gen X, start to age and pull their investments to cover cost of retirement, more investment opportunities are opening up for Gen Y. In America, almost 20% of the population will be over the age of 65 by 2030. The older generation will go from being “wealth accumulators” to “wealth distributors”.

The economic collapse in the late 2000s led many young people to see their parents’ financial well-being fall apart. The newest generation of investors has learned that they need to be smart with their money and stay ahead of the game to avoid a similar fate.

Source: Sprinklebit blog – The Next Generation of Investors

Related Topics:investment Young Investor Gen Y Millennials Baby Boomers Finance

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The 20 Most Common Investing Mistakes, in One Chart

Here are the most common investing mistakes to avoid, from emotionally-driven investing to paying too much in fees.

Published

3 weeks ago

November 7, 2023

Dorothy Neufeld

The Top 20 Most Common Investment Mistakes, in One Chart

The 20 Most Common Investing Mistakes

This was originally posted on Advisor Channel. Sign up to the free mailing list to get beautiful visualizations on financial markets that help advisors and their clients.

No one is immune to errors, including the best investors in the world.

Fortunately, investing mistakes can provide valuable lessons over time, providing investors an opportunity to gain insights on investing—and build more resilient portfolios.

This graphic shows the top 20 most common investing mistakes to watch out for, according to the CFA Institute.

20 Investment Mistakes to Avoid

From emotionally-driven investment decisions to paying too much on fees, here are some of the most common investing mistakes:

Top 20 Mistakes	Description
1. Expecting Too Much	Having reasonable return expectations helps investors keep a long-term view without reacting emotionally.
2. No Investment Goals	Often investors focus on short-term returns or the latest investment craze instead of their long-term investment goals.
3. Not Diversifying	Diversifying prevents a single stock from drastically impacting the value of your portfolio.
4. Focusing on the Short Term	It’s easy to focus on the short term, but this can make investors second-guess their original strategy and make careless decisions.
5. Buying High and Selling Low	Investor behavior during market swings often hinders overall performance.
6. Trading Too Much	One study shows that the most active traders underperformed the U.S. stock market by 6.5% on average annually. Source: The Journal of Finance
7. Paying Too Much in Fees	Fees can meaningfully impact your overall investment performance, especially over the long run.
8. Focusing Too Much on Taxes	While tax-loss harvesting can boost returns, making a decision solely based on its tax consequences may not always be merited.
9. Not Reviewing Investments Regularly	Review your portfolio quarterly or annually to make sure you’re staying on track or if your portfolio is in need of rebalancing.
10. Misunderstanding Risk	Too much risk can take you out of your comfort zone, but too little risk may result in lower returns that do not reach your financial goals. Recognize the right balance for your personal situation.
11. Not Knowing Your Performance	Often, investors don’t actually know the performance of their investments. Review your returns to track if you are meeting your investment goals factoring in fees and inflation.
12. Reacting to the Media	Negative news in the short-term can trigger fear, but remember to focus on the long run.
13. Forgetting About Inflation	Historically, inflation has averaged 4% annually. Value of $100 at 4% Annual Inflation After 1 Year: $96 After 20 Years: $44
14. Trying to Time the Market	Market timing is extremely hard. Staying in the market can generate much higher returns versus trying to time the market perfectly.
15. Not Doing Due Diligence	Check the credentials of your advisor through sites like BrokerCheck, which shows their employment history and complaints.
16. Working With the Wrong Advisor	Taking the time to find the right advisor is worth it. Vet your advisor carefully to ensure your goals are aligned.
17. Investing With Emotions	Although it can be challenging, remember to stay rational during market fluctuations.
18. Chasing Yield	High-yielding investments often carry the highest risk. Carefully assess your risk profile before investing in these types of assets.
19. Neglecting to Start	Consider two people investing $200 monthly assuming a 7% annual rate of return until the age of 65. If one person started at age 25, their end portfolio would be $520K, if the other started at 35 it would total about $245K.
20. Not Controlling What You Can	While no one can predict the market, investors can control small contributions over time, which can have powerful outcomes.

For instance, not properly diversifying can expose you to higher risk. Holding one concentrated position can drastically impact the value of your portfolio when prices fluctuate.

In fact, one study shows that the optimal diversification for a large-cap portfolio is holding 15 stocks. In this way, it helps capture the highest possible return relative to risk. When it came to a small-cap portfolio, the number of stocks rose to 26 for optimal risk reduction.

It’s worth noting that one size does not fit all, and seeking financial advice can help you find the right balance based on your financial goals.

Another common mistake is trading too much. Since each trade can rake up fees, this can impact your overall portfolio performance. A separate study showed that the most active traders saw the worst returns, underperforming the U.S. stock market by 6.5% on average annually.

Finally, it’s important to carefully monitor your investments regularly as market conditions change, factoring in fees and inflation. This will let you know if your investments are on track, or if you need to adjust based on changing personal circumstances or other factors.

Controlling What You Can

To help avoid these common investing mistakes, investors can remember to stay rational and focus on their long-term goals. Building a solid portfolio often involves assessing the following factors:

Financial goals
Current income
Spending habits
Market environment
Expected returns

With these factors in mind, investors can avoid focusing on short-term market swings, and control what they can. Making small investments over the long run can have powerful effects, with the potential to accumulate significant wealth simply by investing consistently over time.