Written by: Katie Gomez

Millennials and Gen Z are experiencing a financial shift, moving away from traditional 9-to-5 jobs to supplement their income with side hustles, including stock market trading and investing.  Yet, they are faced with the challenge of repaying student loans and credit card debts, while also grappling with the inflation surge in the housing market over recent years. These financial pressures make finding a foothold in the market and gaining control of their financial future more challenging.

Despite the fear and uncertainty surrounding markets—including stocks and housing—learning to invest, trade, and provide for yourself remains a worthwhile endeavor. As the last recession showed us, even seemingly “safe” full-time jobs aren’t immune to potential layoffs.

However, if you’re a younger person entering the market, you’ll face specific challenges. One of the major obstacles is a lack of understanding of how to succeed in a challenging market.  In this article, I’ll share some tips and tricks I’ve learned as a young trader, discuss mistakes I’ve made, and offer advice on maintaining consistent profits even in an inconsistent market. So, if you are a younger individual looking to enhance your trading skills, a beginner trying to navigate the market, or an experienced trader, this article is worth your time.

The basics of the stock market

Succeeding as a new investor or trader, whether retail, day, or swing, first requires an understanding of fundamental stock market concepts. This includes understanding different securities, such as stocks and shares, and knowing how buying and selling works. It may be uncomfortable initially, and it might mean forsaking instant gratification. However, Millennials and Gen Z can leverage their younger, fresher minds to absorb new information quickly and start seeing accelerated growth. If it were easy, everyone would do it, but this should not deter you from trying, especially if you are under 35 while your brain is at its peak to learn new things. 

Challenges the younger generations will face in the market

One thing I noticed that causes the most resistance to a younger person trying to get into investing or trading, you might find that your shorter attention span presents a challenge. This can lead to a focus on tasks that offer immediate gratification. While this trait can help with specific trading tasks like multitasking, it’s crucial to focus on long-term investments for consistent profits and avoid burnout from short-term losses.

The stock market, or any market you plan to invest in, is best suited for long-term investment. It is essential to have a clear investment goal as well as a thought out strategy to achieve it. The strategy or trading plan that you set in place ensures you have a future goal to focus on and avoid falling prey to the lure of short-term gratification or concentrating too hard on the losses that result from the ebbs and flows of the inconsistent market. When you have a well-thought-out logical plan, it allows you to remain in control of your emotions. 

Investing in the stock market, or any market, is best suited for a long-term approach. It’s important to have a clear investment goal and a well-thought-out strategy. A comprehensive plan keeps you focused on your long-term goals and reduces the allure of short-term gains. It also helps you manage the inevitable losses that come with market fluctuations, keeping your emotions in check.

A rookie mistake that I made was trading under the assumption that you have to spend money to make money. Hence, I ended up blowing most of my savings on big-ticket stocks instead of approaching my journey from the long-term, safer approach. 

Starting your investment journey with a set expendable amount and contributing consistently trains your brain to prioritize long-term, delayed gratification, helping you adhere to your trading plan’s rationality and preventing emotional decision-making. Stay rational and stick to your long-term plan. 

Trying to predict short-term market movements can be challenging and often futile. Avoid these ill-fated attempts to time the market by focusing on your (long-term) investment strategy instead. If you are unsure just how much you can afford to risk with the market, sit down and figure it out before doing anything else. Assess your financial goals and risk tolerance before you invest a cent, and utilize a trading simulator to make the learning curve as cheap as possible.

Essential tips for new traders

Diversification is probably a term you have heard before because it is one of the most crucial attributes to becoming a successful trader, especially when first starting out. Letting your excitement drive you to focus your investments on specific sectors or even an individual stock can be easy. However, putting all your energy and money into a single place is one of the most common mistakes. Instead, focus on diversifying your investments by spreading them across different stocks. This process helps reduce risk while increasing the chances of overall positive returns. It also shifts your focus to protect the state or your entire portfolio, giving you more opportunities to profit.

Next, one of the best tips for a newer, younger trader is to do your own research. Education is one of the most overlooked parts of being a successful investor, especially for younger generations like millennials and GenZ. The reason why we tend to struggle as younger investors is, again, because of the way our minds work. As most of us grew up in the age of technology and had regular access to the internet, our minds are programmed to trust the first thing that pops up on our search engine. In contrast, research may come more naturally to older traders because their brains are more familiar with putting more time and effort into their research, reading books to figure things out before Google existed. 

Therefore, newer traders must devote the time, energy, and money to conduct thorough research before investing; this research should cover companies and industries you’re interested in to understand their financial health, growth prospects, and competitive landscape better. Additionally, automated trading or AI search engine systems can help offer efficient research in a more satisfying, quicker way. Further, ensure you stay updated with financial news, economic trends, and global events that could influence the stock market and, in turn, affect your investments. 

The overlooked costs of trading 

When you start your trading journey, be aware of the financial costs involved, such as brokerage fees. High fees can quickly eat into your returns. Therefore, you must watch out for the “service fees” you sacrifice in addition to the number of shares you purchase. High fees can quickly eat into your returns over time. 

Another underestimated cost is the emotional toll of trading. Emotions can become a significant obstacle, especially for younger traders who often struggle with the ‘fear of missing out’ (FOMO). Make informed decisions based on your research and analysis, rather than investing based on hype or following others.

Always remain open to learning (especially from your mistakes)

The ability to let go of ego and become willing to learn from your mistakes or other traders is essential to succeeding in the market. The key to long-term success is to make your mistakes as cheap as possible, and the longer you fight against asking for help or admitting you are wrong, your stubbornness results in you bleeding excess money. 

If you are uncertain about investing, consider seeking advice from a financial advisor who can help create a personalized investment plan. Especially if you are just starting, take the time to learn and understand different investment vehicles. There are various ways to invest in the stock market, including stocks, mutual funds, exchange-traded funds (ETFs), and index funds. Expand your horizons by learning about as many processes as possible, understanding the pros and cons of each.

In conclusion, investing involves both learning from your successes and failures. Don’t be discouraged by setbacks; instead, use them as opportunities to grow and improve. You’re never too young or inexperienced to start trading. Instead of focusing on the disadvantages you will experience as a newbie or young investor, focus on the advantage of starting early. The power of compounding means that the earlier you start investing, the more time your money has to grow. The best decision is to start trading and investing today because today is the youngest you’ll ever be.