Advisors Are Telling Millennials To Avoid These Big Mistakes

After relishing one the longest bull markets in history, millions of millennials and young investors, myself included, are getting our first real taste of a severe recession — a scenario that often leads to costly, knee-jerk financial decisions.

A global pandemic has made it unclear when routine socializing and in-person events can continue, dealing a devastating blow to many industries. Even a $2 trillion relief package in the U.S. hasn’t provided an adequate safety net. Not to even mention the double-digit unemployment numbers we’re seeing.

It’s a safe bet to say the aftershock of the Coronavirus Recession will rival, if not outpace, that of the Great Recession. And for those of us fairly fresh to managing such a downturn, it's critical to know which mistakes to avoid. For this insight, I turned to the expertise of eight certified financial planners. Here are the worst money moves they’ve witnessed clients make in a recession.

Stop contributing to retirement plans. A common misstep among investors of all ages is to panic about the market downturn and press pause on investing, including on recurring contributions to retirement plans.

Before you make any changes to your asset allocation, or even consider withdrawing funds, it’s important to consider what your goal and investment strategy is, advises Inga Timmerman, an associate professor of finance at California State University Northridge and owner of Attainable Wealth.

“If you are 35 years old, there is no need to change your investment allocation in a retirement account you cannot touch until 60,” says Timmerman. “If you decide to make the portfolio more conservative, make sure you have a plan — an exact plan — on when to come back, rather than a general idea of when the market starts to recover, as it is impossible to know that.”