Securing Your Financial Future: Tailored Wealth Management for Millennials

Following the worldwide frenzy sparked by the Internet, rapid technological progress, an increasing emphasis on efficiency, and ruthless globalization, individuals are striving to reintroduce substance, meaning, and purpose into their lives. In a world where everything appears to be quick, digitized, and transitory, people long for objects, ideas, and causes they can care about and treasure.

 

This is especially true for Millennials. According to a recent Brookings Institution report, 84 percent of millennials consider a company's involvement in social causes when making purchasing decisions; 63 percent prefer to work for employers who support social causes that align with their personal values; and the majority believe that money is not the most important measure of success.

 

How Millennials Approach Wealth?
 

Millennials, the new-generation investors who make up 23% of the worldwide population and are the most prominent adult group, have a tech-savvy attitude to money, banking, and investing. Unlike earlier generations, millennials are open to new and innovative ways of managing money.

 

Millennials happened to see a drop in house prices during the subprime mortgage crisis in 2008. As a result, they chose uber-style living above property ownership and strive to keep their financial commitments to a minimum. Currently, about 88 percent of millennials have invested their money. Holding sufficient money at an early age has enabled millennials to plan their retirement ahead of time.

 

The 2023 EY Global Wealth Research Report sheds light on the desires and behaviors of wealth management clients around the world. The study includes approximately 2,600 clients from various geographies, age ranges, and socioeconomic backgrounds. Millennials frequently stand out from the crowd.

 

That is only the beginning, however. The data demonstrate that Millennials exhibit a number of distinguishing characteristics that cannot be explained solely by their shorter term of investment experience. Some of the most notable include:

 

1. Millennials are more than twice as likely (73%) as Boomers (29%) to switch providers, transfer assets across businesses, or start working with new wealth managers. They are also significantly more likely (49%) than the global average (33%) to have sought independent expert assistance in the aftermath of external shocks.

 

2. Millennials have a higher risk appetite: they are 20% more likely than the typical client to invest in alternative assets, 16% more likely to contribute to actively managed investments, and three times more likely to utilize digital wallets.

 

3. Greater interest in ethics and sustainability: When choosing a wealth management provider, Millennials place a higher priority on sustainable investing options (20% versus 8% for Boomers) and diverse teams (16% versus 5% for Boomers). 

 

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Popular forms of investments for millennials

 

In terms of financial product investment, millennials appear to be more risk-taking than the Gen X group. However, a high-to-medium risk instrument may not always result in high earnings, and vice versa, making it vital for millennials to invest wisely.

 

Here are the best investment options for millennials who want to build a well-balanced financial portfolio. 

 

1. Public Provident Fund (PPF)

 

It is critical for millennials to understand that starting early and investing for the long term can help grow wealth by leveraging the power of compounding. If millennials plan and execute consistently across well-researched asset classes, they can accumulate a large sum of money over time. The way that PPF works is simple:
 

• PPF investment is deemed suitable for all investors, regardless of age.

• In a fiscal year, one can start with as little as INR 500. 

• PPF offers the advantages of consistent interest creation and tax-saving investment opportunities.

• The interest created by PPF is tax-free and controlled by the government, with a maximum annual deposit of INR 1.5 lakh. 

 

2. IRA

 

Individual retirement accounts, or IRAs, are accounts that allow you to save for retirement while providing significant tax advantages. Money contributed to an IRA can grow tax-free, allowing you to compound at a higher rate than if you had paid taxes along the way. You contribute money pretax, which may result in a lower tax bill today. Withdrawals can commence at age 59 1/2, at which point you must pay taxes on the amount taken out.

 

3. The National Pension Scheme (NPS)

 

The Pension Fund Regulatory and Development Authority (PFRDA) regulates NPS, which is a government-operated plan. It is a broad investment option, including corporate bonds, government bonds, stocks, and fixed deposits. Saving and investing are vital for millennials, whether they are associates, mid-level managers, or senior executives.

 

• The sooner one starts, the better, because investing in 20s and 30s gives one ample time to build a diversified portfolio, which further means better returns.

• When it comes to retirement planning, an NPS investment appears to be more relevant for millennials than other investment instruments, as the government has made some positive revisions in the scheme. 

• Starting with as little as INR 500, one can invest in a variety of asset types, including stock, debt, and government securities, all with low expense ratios. 

 

4. Brokerage

 

Brokerage accounts allow you to invest in securities such as stocks, bonds, and exchange-traded funds. Brokerage accounts are taxable, thus any realized gains will be subject to capital gains tax. If you're already making the most of your retirement savings through accounts like 401(k)s and IRAs, a brokerage account can help you generate even more wealth over time. Many online brokers offer free trading commissions, and you can withdraw your money without penalty whenever you choose.

 

5. Mutual Funds (MF)

 

These are seen as relatively safe and profitable financial products, and are hence increasing favor among Indian millennials. Millennials can diversify their investments in fixed interest choices such as fixed deposits (FDs), public provident funds (PPFs), NPS, and other investment categories by using mutual funds. The way mutual funds work is simple:

 

• A fund manager manages the money that several investors have pooled together.

• This corpus is invested in debt, equity and other asset classes like hybrid, thematic funds. Mutual funds offer opportunities for a diversified portfolio, stable returns, liquidity and low costs. 

• Mutual funds can help you save for both short-term and long-term goals. 

 

Also Read | Top 5 Wealth Management Tools in the Market

 

Tips to keep in mind during investing

 

The digital native generation is also technologically smart when it comes to determining the best strategies to save for their future.

 

Even the most diligent saver might benefit from expert counsel on balancing competing financial commitments. Here are some tips that you must keep in mind before investing 

 

1. Set clear priorities

 

Financial gurus claim that the most successful millennials have clear priorities when it comes to managing their financial future.

 

“You cannot have everything you want, so what is the most important thing to you? You need to list it out and really prioritize it,” says Thomas Kopelman, co-founder and financial planner at AllStreet Wealth. “Also, do the opposite. Make a list of things that you can cut.”

 

2. Create a budget

 

Creating a budget may appear to be a thing of the past for keeping track of one's expenses. However, its relevance cannot be questioned even today. Budgeting helps you understand your relationship with money. It allows you to manage your money. Having a realistic budget in place ensures that you do not overspend. It also allows you to plan well for your future needs. This way, you can draft a better financial plan and ensure that you stick to it.

 

3. Don't forget to broaden

 

Diversification is the practice of investing your money in a variety of investments, industries, or markets in order to spread your risk rather than concentrating it in one location. Diversification ensures that your money is invested in a variety of instruments, allowing the benefits from one to offset the losses from another. 

 

Wrapping up

 

The sooner you start investing, the sooner you can achieve your objectives. Investing early in life also gives you peace of mind and relieves stress. Millennials and Generation Z have age on their side. Taking control of your finances today will surely benefit you.

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