Millennial Investors: Adjusting Expectations For The Real World

Young millennial investors don’t have it easy.

They are experiencing first-hand a number of critical life events, ranging from buying a home, to starting or expanding their families, to juggling work/life balance in their jobs.

Members of this generation are savvy about finances – for example, 85% know that having a long-term financial plan is important, according to researchers for  Capital Group, who just presented their findings on the financial outlook of high net worth millennials and other demographic groups.

But while millennials want to be financially responsible and make good investment decisions, some of their investment expectations seem unrealistic.

That might lead them to being disappointed with their real life financial results.

Still scarred by the 2008 financial crisis, millennials are fearful about volatility, but still think they can earn 16% average annual returns until retirement, report researchers.

Those expectations seem far too optimistic. Former Vanguard chief and investment icon Jack Bogle delivered a sobering speech last week forecasting annual returns under the 4% mark going forward. While that’s only his personal opinion, it should suggest that 16% returns are far above consensus expectations.

The Takeaway: Millennials are under financial and time pressures at work and at home. Here’s three tips that will help them master the financial challenges they face.

Focus on what you can control. Max your participation in workplace 401(k) plans, and avoid the temptation to withdraw funds prematurely before retirement. Know your cash inflows and outflows, keep debt to a minimum, and don’t overspend. Once your investment strategy is in place, don’t stress the returns. That’s totally out of your control. Even though you’re busy, don’t neglect routine financial items like updating beneficiaries, drafting basic estate planning documents, and getting life insurance in place. Several of the millennials we’ve worked with have ambitious plans, but fall short when it comes to taking care of mundane, but critical, financial tasks.

When life happens, make good choices. It’s easy to get overwhelmed when juggling job changes, kids and family, moving and other complex challenges. Don’t let it get to you, and avoid emotional decisions when it comes to finances. Millennials are more influenced by peers and social media pressures when it comes to consumption decisions, making it easy to derail by neglecting long-term savings in favor of unrealistic spending. Have a financial advisor or another person you can trust? Ask them to weigh in before making major – and possibly harmful –  decisions.

Remember, you’re in it for the long-term. With today’s barrage of social, media and investment data, it’s easy to get overwhelmed by the short-term and lose sight of what really matters for the long-term. While the “trees” are important, many millennial investors lose sight of the “forest.” With an impressive 60- or even 70-year time span ahead of them, millennials need to ensure short-sighted thinking doesn’t prevent them from reaching their lifetime goals.

About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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2 Responses to Millennial Investors: Adjusting Expectations For The Real World

  1. Victoria Rothstein December 6, 2018 at 4:37 am #

    16% average annual returns every year would be like beating the market every year, it’s very unrealistic. In my opinion better for millennials to invest in an exchange traded fund tracking the S&P500 and invest for the long term.

    • Mari Adam December 6, 2018 at 8:22 pm #


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