Millenials hear so much advice about how to prepare for the future that it can feel tempting to ignore every bit of it. That’s understandable. Receiving so much information, on so many topics, from so many sources can feel overwhelming. If those overwhelmed millennials listen to any of the advice bombarding them, preparing for the future financially is about the best suggestion to heed. Here, we’ll discuss one type of financial advice a millennial might want to consider even if they ignore everything else: turning savings into an investment.
Investing in Your Future
Typical advice for saving is to have six months of expenses set aside and a $1,000 emergency fund. So, if someone has $3,000 in monthly expenses and bills, financial experts recommend having $18,000 in savings plus that extra $1,000 for emergencies. But, for many millennials, and even many older adults, there’s no workable way to save that much. Some millennials have, instead, learned to save what they can each month, and then put a portion of that savings into stock trading. Stock trading is using trading software to buy and sell stock, with the goal of making money on the daily, weekly, and monthly fluctuations in the stock market. By going to TradeZero, you can see an example of this software.
How Stock Trading Works
There are two types of stock trading according to an article on NerdWallet: active trading and day trading. Active trading is when an investor times the market with the goal of making money within a few weeks to a month. Active traders watch for short-term events in companies or the economy that might affect the price of stocks and then time trades based on that information. Typically, active trades place ten or more trades each month. Day trading is when an investor buys and sells stocks in a single day. Day traders aren’t paying attention to the small details of businesses and the economy like active traders but to what is happening in certain stocks hour to hour.
Advice to Get Started
If stock trading sounds like a decent idea, the first step is opening a brokerage account. This is an account designed to hold investment funds. Once an account has been opened, typically with an online broker, depositing money is next. This money is used to make trades. According to Investors, for beginning investors or working persons, $500 to $1,000 is the ideal amount to start with. Next, a trading budget is set. Stock trading advisers recommend only trading with 10% of an investment account to manage risk, or only the amount an investor can afford to lose. This is especially true for new investors just learning stock trade. After creating an account and setting a budget, it’s tempting to jump right in. A better option is to set up a practice stock trading account. This is known as paper trading and lets investors get a feel for stock trading before putting their money on the line.
Like everything else millennials receive advice on, stock trading advice can become overwhelming. For those who may be interested in this financial planning, getting started and learning as you go is the most practical way to learn. As young investors get a feel for how stock trading works, they can then seek specific advice for the trading situations they’re interested in.