How Millennials Can Navigate the Bear Market

Millennials are often seen as the youngest investors, but many of them came of age during the Great Recession of 2008 and their financial behaviors were shaped as a result. Many millennials also face unique challenges—including high levels of student loan debt—that set them apart when it comes to attaining financial security, especially during periods of volatility.

Key Takeaways

  • For many millennials, the 2008 financial crisis had a lasting impact on their investing behaviors 
  • Millennials who are interested in diversifying their portfolios can benefit from dollar-cost averaging with ETFs
  • For millennials running a small business, PPP loans may be the best option for helping them navigate this time

Tactical Advice for Working with Millennials

For older millennials, the current economic climate is dredging up memories of the 2008 financial crisis and many are prepared to look for opportunities to come out ahead. But those opportunities aren’t necessarily about buying stocks at deep discounts. “If there’s any silver lining I can think of from a money management point of view, it’s that people will find more excitement and more urgency in creating savings and cash reserves than they do in participating in the market,” says Douglas Boneparth, president of Bone Fide Wealth.

Smart investing strategies can keep young investors in the market and two key factors can help advisors offer powerful guidance during this time. The first is risk tolerance. “If millennials are invested in a way that will keep them in the market long-term, then they’re invested appropriately,” says Nina O’Neal, investment advisor at Archer Investment Management. She emphasizes that this requires assessing each client’s risk tolerance regularly and opting for more conservative portfolio allocations whenever an investor’s risk tolerance calls for it. “I would rather have an investor at 28 get a moderate but reasonable return over time but stay in the market than find one at the same age who wants to shoot for home runs every day.”

The second strategy is dollar-cost averaging. While working with older investors can mean focusing more on rebalancing and tax-loss harvesting, dollar-cost averaging can be a great way to reduce the emotional component many young investors are facing and help them overcome their fears about staying in the market. For clients who are interested in diversifying their portfolios, dollar-cost averaging with ETFs can position them to earn the long-term returns they seek.

Advice for Small Business Owners

One of the main areas where millennials are hurting is small business. Since many millennials are self-employed as either freelancers or business owners, the current crisis has hit them especially hard and PPP loans may be the best option for helping them navigate this time. “A lot of our clients are self-employed or getting contract work and they’re looking at that loan as an opportunity to re-stabilize their business,” says O’Neal. For those clients who are unable to access the loans through more traditional lenders, fintech companies such as Lendio could offer another option.

“Some of the younger clients are worried about whether the bleeding will ever stop,” says Dasarte Yarnway, founder and financial advisor, Berknell Financial Group. But he also emphasizes that this is an opportunity to guide young investors through the crisis and help them come out on the other side. “This is where our value is shown and the advice we can offer is: Continue to invest systematically as you’re re-picking up those same quality investments at lower prices and seek out opportunities in other parts of your financial plan.”

The Bottom Line

While the overall advice for millennial investors mirrors similar advice for Gen X and Baby Boomers investors, the longer time horizon that millennials have before retirement, and the lower level of exposure to the market, are important factors to consider when determining the best path forward.

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