Millennials: Forget YOLO Stocks. Buy These Instead

A new breed of small investors is snapping up YOLO stocks without understanding the risks. TELUS stock is a better alternative for risk-averse millennials who can’t afford to lose the money.

| More on:
Top view of mixed race business team sitting at the table at loft office and working. Woman manager brings the document

Image source: Getty Images

Millennials worldwide watched the share price of the U.S. retail chain GameStop (NYSE:GME) soar 1,915% from January 4 to January 27, 2021. An army of small investors was challenging hedge funds at Wall Street. Suddenly, the younger generation is looking for YOLO (you only live once) stocks to make substantial returns.

Most millennials also have a fear of missing out (FOMO). They want to join the party to make easy money while a stock’s momentum remains. The tendency is to go with the flow and go all out on YOLO stocks. However, if you’re trying your hand at the stock market for this first time, it isn’t the best strategy.

The pitfall

You’re likely to lose money if you’re a novice or inexperienced investor who jumps onto trends without understanding the risks. Because you only live once, you want to hop along for the ride like your peers. You must have a knowledge base before putting money in the stock market.

Also, stock investing requires a reasonable skill set. Carefully evaluate the investment prospect first before executing a trade. After peaking to US$347.51, GameStop shares dropped 88% to US$40.59 on February 19, 2021. It indicates that the spikes and dips of a YOLO stock are abnormal.

Retail investors swarmed the free-trading app Robinhood to take part in the action. The app targets young people new to investing. Unfortunately, Robinhood offers very little research or resources for newbies to make sound investment decisions.

Advice to millennials

It’s nice to see young Canadian investors learning to invest in the stock market. However, avoid YOLO trades if you can’t afford to lose the money. Please don’t buy a stock because people are talking about it on social media. Also, it’s dangerous to invest if the reason is that a friend or someone you know owns the stock.

Strange things happen in the stock market, especially with highly volatile names like GameStop. No one can predict the stock market behaviour in the short term. A 1,000%-plus return is enticing if you see a post on social media. The danger is that it starts a feeding frenzy.

Grow wealth over time

Remember that growing wealth takes time. If you were to invest today, your money is safer with Telus (TSX:T)(NYSE:TU). Millennials are familiar with telecommunications companies and the nature of the business. The $34.24 billion company is the second largest in Canada’s telco industry.

As of April 1, 2021, the share price is $25.39. The stock is up by only 2% year to date, although analysts forecast the stock to climb 34% to $34 in the next 12 months. Since Telus is a dividend stock, there’s passive income on top of the capital gains.

The current dividend yield is a juicy 4.9%. Assuming you invest $6,000, the dividend payout is $294. In a Tax-Free Savings Account, your earnings are tax-free. The income could also last for years.

Unlike GameStop, Telus is a no-nonsense investment. The company is raising $1.3 billion to fast-track the 5G wireless network’s rollout across Canada. It will use some of the funds to expand its fibre-optic broadband network. Last, the telco stock is recession-resistant. Telus can endure economic downturns.

More harm than good

The YOLO and FOMO feelings can harm millennials financially if they can’t contain them. It would be best to pick safe assets than throw money on high-risk stocks.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. David Gardner owns shares of GameStop. The Motley Fool recommends TELUS CORPORATION.

More on Dividend Stocks

Retirement plan
Dividend Stocks

Planning for Retirement? Here Are the Best Canadian Dividend Stocks to Buy

Buying two of the best Canadian dividend stocks now for the long term can help you retire without financial worries.

Read more »

investment research
Dividend Stocks

A Dividend Giant I’d Buy Over TD Bank Stock

Energy and financials are the TSX’s sector heavyweights, but I’d choose a dividend giant in the former over a big…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Dividend Stocks

2 Dividend Stocks Worth a Permanent Spot in My TFSA

Restaurant Brands International (TSX:QSR) and Berkshire Hathaway (NYSE:BRK.B) are two of my top TFSA holdings that I intend to hold…

Read more »

Increasing yield
Dividend Stocks

3 Canadian Dividend Stocks Offering High Yields and Reliable Income

These valuable dividend stocks offer solid deals right now, with ultra-high yields that will certainly last well beyond this downturn.

Read more »

potted green plant grows up in arrow shape
Dividend Stocks

Best of Both Worlds: 3 Growth Stocks That Also Pay Dividends

Dividend stocks are great until a downturn ends. But luckily, these three dividend stocks also offer a massive amount of…

Read more »

Payday ringed on a calendar
Dividend Stocks

Monthly Passive Income: 2 Top TSX Dividend Stocks to Buy in June 2023

Here are two of the best TSX monthly dividend stocks you can buy in June 2023.

Read more »

Female hand holding piggy bank. Save money and financial investment
Dividend Stocks

RRSP Wealth: 2 Great Canadian Dividend Stocks to Buy in June 2023

Top TSX dividend stocks are now on sale.

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

Retirees: 2 TSX Dividend Stocks That Reliably Pay You Cash

With strong underlying businesses, high-yielding dividends, and stable cash flows, these two TSX stocks can be excellent investments to consider.

Read more »