3 Investment Tips for Millennials

 

 

Let’s be honest, investing isn’t always easy – at least it doesn’t always seem that way. With so many different options available on the market (from mutual funds to stocks), choosing the best strategy can be overwhelming. That’s where the assistance of a financial advisor comes into play.

 

It’s very easy to get caught up in hot tips, news headlines and guidance from family and friends. It seems like everywhere we look someone is giving millennials investment tips. The truth is finance is personal, and that’s why it’s so important to get tailored advice from a professional. With that being said, there are some pieces of advice that all young investors should know.

 

Here are three investment tips for millennials who want to start investing:

 

Start as early as possible

 

Yes, that’s right, young people should have started investing way before they were coined as millennials. As soon as you have an income (no matter how big or small) a portion of your paycheque should go into savings.

 

Thanks to a little thing called compound interest there are big benefits for millennials who start investing early. Compound interest helps your investments grow faster because your monthly earned interest (or dividends or capital gains) is reinvested back into your account. Therefore, the next month you earn interest on the previous month’s interest and so on for years to come. It’s brilliant.

 

Think long term with your strategy

 

According to Forbes, investing for the long term helps millennials see the bigger picture when it comes to risk versus reward in your portfolio. “Risk is kind of like that friend who regularly cancels plans but always comes through in a pinch. There might be heartache in the day-to-day, but in the long run, you’ll be glad you stuck it out.

In investing, more risk means the potential for more reward. Could you lose money and never collect that premium? Sure, but that’s unlikely when you’re in it for the long-term.”

 

Be honest with your financial advisor

 

Professional advice can help find an investment strategy that fits your individual plan, financial capabilities and life goals. However, that can only happen if you are completely honest with your advisor.

 

Think of a financial advisor as your financial doctor, they can’t totally assess the situation and provide a recommendation until they have all the information. This includes your short term and long-term goals, tolerance for risk, time horizon and general knowledge of the investing world.

 

If you have questions about investing or want to start investing but don’t know where to begin, I’m happy to help. Let’s chat about your goals and investment options for millennials.

 

*This content was originally created by Manulife Securities for information purposes only. It has been distributed for advisor publication.*

What should you consider when you review your term life insurance policy?

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The purpose of buying life insurance is to ensure your loved ones are taken care of in the event of your death.  The main goals for purchasing life insurance are to replace your income, pay off major debts like mortgages and other loans, and to provide financial support for your spouse, partner or children’s futures. 

 

Life insurance is not something to be filed away only to be pulled out at the end of its term. It is a good idea to review your life insurance annually or, at the very least, every 5 years.  Just like your will, there are changes that happen in your life that need to be reflected in your life insurance to ensure your policy is still doing what you intended it to do when purchased.

 

Here are some life changes that should prompt you to review your insurance coverage:

 

Family

 

Family financial needs change as time passes. For example, your spouse or partner who was once a stay at home parent may now be working. In contrast, someone contributing financially to the household in the past may now have gone back to post-secondary studies or reduced their work hours to care for an elderly parent. Your children, who were once completely dependent on you, may have graduated and be moving towards financial independence.  Have you recently done an analysis to see if your policy reflects your family’s current needs?

 

Change in Job

 

New jobs come with changes in income, benefit plans, lifestyle and retirement goals. You want to ensure that, if you were to pass away unexpectedly, your spouse or partner will have the income to sufficiently look after him or herself or your children.  Is your present insurance coverage sufficient to cover the loss of your income?

 

Property Ownership

 

One of the primary reasons for buying life insurance is to cover the family’s mortgage in the event of an income earner’s death.  Does your current insurance limit reflect the amount of your mortgage?

 

Health

 

Your health may improve with age or you may develop an illness.

If your health has improved but your policy was issued with smoker rates, a substandard rating, or exclusion, you can ask your insurer to reconsider your rates. For example if you have not smoked for the last 12 months, you can apply for lower non-smoker rates. In contrast, if you have developed an illness you may want to reconsider your coverage to match your increased risk.

 

Life Insurance Products

 

Insurance companies continually develop new products to meet customer needs. A new product may be more suitable for your particular insurance requirements so it pays to review what is available.

 

Policy Options

 

Policy options can be added to your policy to meet future needs.  One example is a Guaranteed Insurability Rider which allows you to purchase additional insurance in the future without a medical exam or other evidence of insurability. Other riders to consider are Child Protection Rider and Spouse Insurance Rider.

 

Term policies generally last 10 or 20 years and some have the option to be converted to permanent insurance which provides protection for your entire life. One advantage of converting from term to permanent insurance is to lock in the cost of your insurance.  The cost of term insurance will increase with each policy renewal, while the cost of permanent insurance remains level for life.  Another advantage of having the option to convert is that medical evidence of good health is not required.   If you were to develop a health issue such as diabetes, the conversion option enables you convert to permanent insurance based on your health when you first took out your term coverage.

 

Considerations for taking advantage of this kind of policy option include, what insurance products are offered for conversion, at what price the option is offered, and at what age the option is available.

 

Policy Ownership

 

Life insurance policies can be held personally, in a corporation, in a trust or in a combination of these entities. Keep in mind the current aim of your insurance, when and where the insurance benefits will be needed and where funds are available to pay the premiums. For more detailed discussion on this topic please see Ownership of Life Insurance – Planning Considerations.

 

To help you analyze your current insurance needs, here is a calculator to figure out how much money you need to cover your debts and ongoing expenses for your loved ones.  InsureRight Calculator.