Essential Investing Tips for Millennials

If you’re a millennial, you might think that, between student debt and credit card bills, you’ll never be able to invest. Fortunately, there’s good news. Millennials are saving more and saving earlier than their parents, despite the financial challenges they face, according to Elliot Weissbluth, CEO of HighTower Advisors, in an interview with The Daily Ticker. The next step is to leverage those savings by making smart investments. Keep these tips in mind if you have some savings that you’d like to grow into greater wealth.

Invest With the Right Broker

According to Weissbluth, about 90% of millennials plan to handle their finances differently from their parents, whether that means dumping their family’s financial advisor or switching brokerages. Many are also choosing to manage their own investments. If this sounds like you, know that there are many brokerages available, and at least one can fit your investing style. But if you want the best possible fit, you’ll have to do some research. Look for:

Minimum Balance Requirements. Some brokerages don’t mandate an initial funding level. Others require you to deposit thousands of dollars before you can start trading – and if you fall below that amount, you might incur fees. If you’re just starting out, try a firm with a low balance requirement. $1,000 or less can get you an account with a wide variety of big-name and deep discount brokerages. Account Fees. Consider how you’ll want to trade and whether these preferences could cost you. If you’re a beginner, you might want access to broker-assisted trades. At a few firms, this comes free. At others, each assist could cost you more fees. Will your brokerage charge you an annual fee for IRAs? Will you be subject to an inactivity fee? At some firms, you’ll be charged even if you trade once or twice a year. Read the fine print and ask about fees for any service you might want. Promotions. If you’re budgeting in retirement savings, along with paying off student loans and building an emergency fund, you don’t want to waste the little you have to invest on sky-high commissions. But if you prefer a pricier firm, look for one that offers free trades for opening an account, or a specified number of free (or reduced rate) trades per year.

And remember: You don’t have to go with a recognizable brand to get great results. Deep discount brokers can be just as good as the ones advertising on TV, and the amount they’ll save you can really add up.


Opt Into Your 401(k)

Saving for retirement is critical, and smart millennials will maximize all of the options available, from IRAs to brokerage accounts, and, perhaps most importantly, 401(k)s . If your employer offers one and you can afford to participate but haven’t signed up, don’t keep putting it off. Opting in will give your retirement savings a huge boost in several ways:

Contributions are pre-tax. Because 401(k) contributions come out of your paycheck before taxes, they allow you to save more. And because they’re withdrawn automatically, you don’t have to decide whether to pay yourself first. Contributions might be eligible for an employer match. Many employers that offer 401(k)s also match a percentage of employees’ contributions, typically half of what employees contribute, up to 6% of their salary. For millennials, this amount could amount to about half of their total retirement income. If you’re in the job market, ask about companies’ 401(k) benefits, and if possible, prioritize those with a generous match. Then contribute enough to get it. Contributions are automatically invested. 401(k) plans offer a menu of options that are appropriate for retirement investors, allowing employees to grow their contribution. Just be sure you’re invested in inexpensive funds, or you’ll be spending your nest egg on fees.


Don’t Be Afraid To Take Some Risks With Your Investments

Having lived through a recession, many millennials are trying to preserve their savings by keeping out of equity investments. Though young investors should have the most aggressive portfolios, including a heavy weighting of stocks, 52% of millennials surveyed indicated low confidence in the stock market, according to CNN. While you won’t lose money in a savings account, without investing it you also won’t be able to help grow that money. The younger you are, the more you’ll want to invest that money in equities because you can still afford to take the greater risk for higher reward than if you invested the money in bonds.

Risk aversion is understandable, but too much can work against you. Not only do the potential gains of investing in stocks outweigh the risks, but if you hold a diversified portfolio of stocks, bonds and other asset classes, your odds of losing much money are greatly diminished.


The Bottom Line

It’s true: Millennials are going to have a tough time reaching the same financial benchmarks that their parents did, from homeownership to retirement. Luckily, many have also learned valuable lessons about planning for the future from watching unpredictable markets. The trick for millennials is to make sure their cautious nature toward money doesn’t handicap their investments. By continuing to save and accepting some risk, millennials can make the most of the hand they’ve been dealt.

This article originally appears on Nerd Wallet.