If the thought of investing your money is completely overwhelming, you’re not alone. Countless Americans are hesitant to place their money in the market or real estate thanks to the recession in 2008, the housing crisis, and the Madoff Ponzi scheme (have you seen Wizard of Lies?). Except, these were extreme cases.
Let’s talk about reality. The one percent interest banks dole out to keep your cash safe may not be enough to help you pursue your goals. The Spring 2017 Merrill Edge® Report, a bi-annual survey that looks at the financial concerns and priorities of mass affluent Americans, found 63 percent of millennials are aiming to save or earn enough to live their desired lifestyle. They should consider investing as an important component in their overall savings strategy to pursue this goal.
The word investing can be scary, especially if you don’t know much about it. This is why educating yourself is essential. Luckily, we had the opportunity to get an insider’s take on investing from David Poole, head of Merrill Edge Advisory and Client Services.
Levo: Investing always sounded like something older or only very wealthy people did for retirement. Should everyone be investing? Why? How can I get started?
DP: When it comes to investing, it’s important to remember: it’s never too late, or too early, to get started. Before you start, determine what you’re investing for to estimate how much you will need to invest to help you pursue your goals. For example, if you’re saving for something like retirement and your employer offers a 401(k) plan and matches your contributions, make sure you’re investing enough to take advantage of this match. If you’re saving for a big purchase, such as a home or car, determine how much money you’ll need to create a saving and budgeting strategy that will allow you to regularly contribute to this saving fund.
Levo: Curious as to how much money one needs to get started. What if we saved and budgeted $5,000 to invest? Is this enough to get started?
DP: Absolutely — it’s all about getting started and determining what you’re investing or saving for. In fact, if you’re looking to invest online, you can create a portfolio with as little at $5,000 through Merrill Edge Guided Investing.
Levo: Let’s say the only thing we know about investing comes from The Wolf of Wall Street. Should people try and do it on their own? What are the choices out there and what’s the difference between them?
DP: It really comes down to your investing style —whether you want to be more hands-on or would rather work with an advisor for personalized advice. At Merrill Edge, we offer three investment choicesto support our clients’ investing preferences. The first, is our Online Investing and Trading Platform, which provides digital tools and research to help you make your own investment decisions.
We also offer Merrill Edge Guided Investing, our digital investment advisory offering, which provides an intuitive online platform that delivers a diversified ETF portfolio tailored to your risks and investment objectives. All Merrill Edge Guided Investing portfolios are supported by Merrill Lynch portfolio managers.
And then, if you want an investment plan tailored to your needs, we offer Merrill Edge Select Portfolios, where you work with a Financial Solutions Advisor to help you define and develop an investment plan to pursue your financial goals.
Levo: So, do I really need an advisor? When is that really necessary?
DP: It truly depends on your personal investment style as well as the complexity of your investment situation. Advisors are able to help you build customized strategies and work with you throughout your life to pursue your goals as your life changes.
Levo: Millennials are clearly comfortable working in the digital and mobile realm. Do you see this trend sticking?
DP: According to the Spring 2017 Merrill Edge Report, 40 percent of Americans say they’re using an online or mobile portal to manage their investments, and 13% are using a robo-advisor or would consider using one in the next year. Those who use an online investment advisory program or robo-advisors have positive experiences and report they make them feel more knowledgeable (51 percent), empowered (31 percent) and savvy (14 percent).
Levo: One piece of the retirement puzzle is putting money into a 401(K). What should you do if your employer doesn’t offer a 401(k) option?
DP: If you don’t have access to a 401(k) plan, you may want to think about investing in a Roth IRA. A Roth IRA, an individual retirement account, may be appropriate for those who are further from retirement because the longer your earnings have the opportunity to grow, the more potential income you could have that will never be taxed. In fact, when predicting what the next decade of investing might bring, some Americans (29 percent) believe the 401(k) account will no longer be the ‘gold standard.’ 1
Levo: So, let’s end with the “million dollar question.” I know that’s not the right number but, how much should millennials have when they hit their retirement age?
DP: Great question. Our report showed that 40 percent of non-retired Americans believe reaching their “magic number” — the amount of money needed to live their desired retirement — will be “difficult” or “virtually impossible.” Many investors are unable to articulate or are underestimating how much money they will need in retirement; one-quarter of Americans believe they will only need $500,000 to $1 million in savings to retire, and 19% don’t know how much to save. The reality is that there is no specific “magic number.” The amount you need to save and invest depends on how much you expect to spend in retirement and your future income, so take a look at what you want your future to look like and create a strategy to pursue that lifestyle.
Spring 2017 Merrill Edge® Report
Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.
MLPF&S, a registered broker-dealer and Member Securities Investor Protection Corporation (SIPC), is a wholly owned subsidiary of Bank of America Corporation. MLPF&S and Managed Account Advisors LLC
(MAA) are registered investment advisers. Investment adviser registration does not imply a certain level of skill or training. Merrill Edge investment advisory programs are offered by MLPF&S. Merrill Edge® is available through Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S), and consists of the Merrill Edge Advisory Center (investment guidance) and self-directed online investing.
Please review the Merrill Edge Guided Investing Program Brochure at www.merrilledge.com/guided- investing-program- brochure for important information including pricing, rebalancing, and the details of the investment advisory program.
Merrill Edge is available through Merrill Lynch Pierce, Fenner & Smith Incorporated (MLPF&S), and consists of the Merrill Edge Advisory Center (investment guidance) and self–directed online investing.
MLPF&S is a registered broker-dealer, Member SIPC and a wholly owned subsidiary of Bank of America Corporation. The Merrill Edge Select® Portfolios are part of the Merrill Edge Advisory Program and
require participation in the program to invest. In addition the Merrill Edge Advisory Program is sponsored by Managed Account Advisors (MAA) an affiliate of MLPF&S. MLPF&S and Managed Account Advisors LLC (MAA) are registered investment advisers. Investment Adviser registration does not imply a certain level of skill of training. Please review disclosure statement for a full description of services and fees.
This article was written in partnership with Bank of America and Merrill Edge. Find out more about how millennials are approaching their finances in the Merrill Edge Report: Spring 2017.
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