Another Great Buying Opportunity For Millennial Investors

The recent correction in the U.S. stock market has spooked the average retail investor and the already low participation in investing has been increasing due to panic selling. Both millennial and older investors need to realize corrections are normal and the majority of the time a great way to buys stocks on sale.

Since 1945 there have been 111 instances where the S&P 500 has pulled back at least five percent. Only 11 of the pullbacks have turned into bear markets (greater than 20 percent), whereas the majority were healthy market corrections. Simply put, there is a one in ten chance that a pullback of five percent will turn into a bear market. Even more astounding is the rebound that occurs in the stock market after a correction. Historically within four months stocks have recovered all their losses and are back to the prior highs.

Millennials, similar to any other generation, love a good deal. They will search online for the cheapest airfare or new couch and buy when there is a sale. The same type of attitude should be used when buying into the stock market. From time to time the stock market falls to levels that are equivalent to a clearance sale at the local department store, giving all investors an opportunity to buy more shares at a lower price.

What the millennials have in their favor is time. A large portion of the demographic will not touch their investment money for decades and unless the world completely goes to hell in a hand basket, the stock market should then be substantially higher. This is why putting money into stocks on sale and not sitting on the sidelines is so important to the younger generation.

While many millennials are intelligent enough to realize that the greatest wealth creator for the average person over the last century has been the stock market, it does not correlate to the statistics. A recent Bankrate.com survey found that only 26 percent of Americans under the age of 30 own stocks. Backing up the finding was a Goldman Sachs study that found only 18% of millennials trusted the stock market as the best way to save for the future.

The trust factor is the biggest issue for the younger generation. There is a heavy mistrust towards Wall Street after the 2008 financial crisis as well as the 2000 tech bubble. In both instances the blame was put on Wall Street and millennials or their parents were likely hurt by the recessions they still feel the pain and are therefore hesitant to be burned for a third time.

The scars of the last two recessions are still healing and it has caused millennials to miss out on buying stocks on sale. As a matter of fact, not only is the retail investor ignoring the buying opportunity, they are doing something much worse – selling. According to Bank of America Merrill Lynch’s fund flow study the selling during the recent sell-off was abnormally high. From Wednesday August 19 through Wednesday August 26 there was over $29.5 billion that were pulled out of equity funds. This was the highest number since the firm started keeping tabs on the flows in 2002. Due to the long timeframe that the younger generation has before they start to take money out of their investment accounts, every correction in the stock market should be a buying opportunity.

One strategy that millennials can employ involves investing in what you know. For example, look at Chipotle Mexican Grill (CMG), where the millennials will pay $9 for a burrito without blinking an eye. Instead of eating out every night, a millennial could have taken $1,000 in November 2008 and purchased 27 shares of CMG and today that investment would be worth over $19,000! The same can be said for Apple (AAPL), Under Armour (UA), and many other products the millennials buy on a regular basis.

There are two words that millennials need to adhere to when it comes to investing – early and often. Start investing early, as the magic of compound interest will have you retiring earlier. Often refers to regular contributions to an investment account to take advantage of corrections and buy at discounted prices.

All the studies and charts in the world that display why millennials need to begin investing in the stock market today are great, however getting them to make the first move is not easy. Everything from opening a brokerage account to determining how much money to invest to deciding what to invest in are overwhelming tasks in the mind of a large number of potential investors.

The first step any new investor must take is opening an account. For US citizens, if an IRA has not yet been established, that would be the first account that should be opened. For the majority of millennials a Roth IRA would be the best option, but there will be a few instances where the annual income is an issue.

Millennials that would like to go about investing on their own could opt for an online brokerage firm that offers very low-cost investing as well as free investment tools. Most investment firms are offering online, easy to use options for the technology savvy investor, aka the millennial.

Now that every millennial is ready to run out and start investing it is time to take it to the next level. All of the concepts covered in this brief article as well as more in depth advice on how to get started in the world of investing will be available for free at The World Moneyshow in Toronto on October 31. Experts in a range of fields will be there to answer questions that range from opening an account to placing the first trade and picking what to buy.

Joining the four-hour panel will be Peter Hodson, the owner and editor of Canadian MoneySaver along with several other experts in the field of millennial investing. To sign-up today for free please go to www.moneyshowuniversity.com or email jordanberger@moneyshow.com

Matt McCall, founder of Penn Financial Group, an investment advisory group serving individual and institutional clients from coast to coast. Author of two best selling books, “The Next Great Bull Market” and “The Swing Trader’s Bible”. Regular guest on Fox News Channel, Fox Business Network, CNN, and GBTV with over 1000 TV segments in the last 5 years. Writing contributor for the International Business Times, The Blaze, Benzinga, and Index Universe.