It is possible to have too much cash, just not if you are a millennial.
The days of 2008-2009, when investors saw losses in their investment portfolios equal 50-60% of their value are all but memories for most, but surprisingly not the millennials.
Millennials, ages 18-29, have spurred on some of the greatest technology based companies and tools that we have grown to love. Mark Zuckerberg, to name just one.
While this generation propels innovation, they have surprisingly decided to adopt an investing strategy that closely mirrors that of the World War II generation, which is frankly, a non-investment strategy.
Knowing exactly where and when the millennial demographic made the almost unilateral decision to invest ultra-conservatively, or not at all, is left to those with crystal balls. A recent Bankrate.com survey reports that 4 in 10 young investors said that cash is their preferred way to invest. With confidence we can all agree that Warren Buffet did not become one of the richest men by investing all in cash.
What we do know is that certainly the stock market crash in 2008-2009 and innovations like Kickstarter, where millennials can be distant social media like investors, have resulted in a demographic that is downright scared to risk even their loose pocket change.
"It used to be that if you were in your 20's, you could afford to have 100 percent equities because you had so much time. That may no longer be true anymore. You can't push somebody out of their risk aversion," declares Michael Branham with Cornerstone Wealth Advisors.
Risk aversion is a real concern for anyone who invests. How much risk are you willing to take on for what kind of return?
However, the millennials are overlooking one simple and undeniable fact, which is that they belong to a "do-it-yourself" retirement demographic who likely won't have Social Security or private company pension plans to fund a portion of their retirement dollars.
Companies like Sprinklebit, a new online investment platform geared directly at this generation, have taken this millennial mistake and created an opportunity. Just like you have flight simulators for future pilots, Sprinklebit has created an investor simulator for young investors.
With $5,000 free Sprinklebucks, future investors are able to create a fictitious portfolio where they can hopefully change their risk aversion into risk awareness. Who can turn down free money, even if it is fake money?
When you want to know what is going on in a millennial's everyday life, you simply search for them on Twitter, Instagram or Facebook. It doesn't take long to decipher what they have been up to and even what they ate for breakfast. There are few mysteries in life anymore now that we have social media as our friend.
However, where there is pro there is always a con lurking. According to the American Institute of CPAs and the Ad Council, three in four millennials turn to their peers for financial advice. Why is this? As a society we score an "F" in educating the younger demographics about everyday money principles, including investing.
"Millennials are staying away from investing because they think they are staying away from bad deals. We offer an online University with 24 free chapters on investing to help Millennials feel more comfortable," says Sprinklebit CEO, Alex Wallin.
• Who would lend $5,000 for a year and earn $50 in interest?
• Why invest $5,000 in stocks when you don't know what you have to gain?
• Who should you trust?
You don't just sit down and build a car without a manual and expertise. The same philosophy applies to investing.
While millennials are off dreaming up the next big technology company or figuring out complex solutions to worldwide problems, they should also be thinking about investing as a great way to build towards their retirement.
While that word retirement might seem very far away, remember that it is possible to spend as much time, if not more, in retirement than the working years. I don't know about you, but the thought of outliving my money in the future is much scarier than taking a risk on investing in a solid company today.
For more articles like this, visit my website Everyday Finance.
How to vote
Vote-by-mail ballot request deadline: Varies by state
For the Nov 3 election: States are making it easier for citizens to vote absentee by mail this year due to the coronavirus. Each state has its own rules for mail-in absentee voting. Visit your state election office website to find out if you can vote by mail.Get more information
In-person early voting dates: Varies by state
Sometimes circumstances make it hard or impossible for you to vote on Election Day. But your state may let you vote during a designated early voting period. You don't need an excuse to vote early. Visit your state election office website to find out whether they offer early voting.My Election Office
General Election: Nov 3, 2020
Polling hours on Election Day: Varies by state/localityMy Polling Place