To invest or not invest? It’s a common question that many young people are presented with, and a question where many young people fall victim to common misconceptions when it comes to investing their money. The following article will delve into and challenge the top reasons young people tend to not invest.
There is too much risk in investing young.
It’s very common for young people to be scared about the risk involved with investing. You may have even heard the phrase “there is no reward without risk”. However, for young people, age is an asset, and should be considered as such. Young people have the ability, and luxury to use the time they have as a tool to ride out volatility and fluctuations in the market.
To contextualise this idea, consider hypothetically that after investing $100,000 in your portfolio, the market crashes due to a national recession. This causes your original investment to decrease in value to $50,000, and although this may seem scary at first, as a young investor you have time to let your portfolio recover, whereas for a retiree, they may not have as much time if they require the money to fund their lifestyle in retirement.
Don’t have enough money to invest
Many people assume that to start, you need a substantial amount to invest. However, there are many ways to invest that can start from as little as $5.
Simply put, the minimum amount that an investor can invest is the lowest dollar or share quantity of a security or fund that can be purchased. A majority of online trading platforms have a minimum investment amount of $500, which comparatively is a reasonable starting point for young investors. However, for investors looking to trade a smaller amount, micro-investment platforms are a great starting point.
Lack of confidence
Its completely reasonable to find investing daunting especially at first. Investing during economic downturn with rising interest rates and low consumer sentiment can be a deterrent and intimidate young investors which is why it’s a great idea to reflect on what risk level you are comfortable with.
There are a vast range of products that are tailored towards an array of risks levels, ranging from investments in government bonds and term deposits which are generally characterised as defensive assets, to investments such as NFTs and Cryptocurrency which are considerably more risky and have a greater capacity to be impacted by volatility.
Too young to start investing
One of the most fundamental components of investing, is time, and investing is a long-term game. With greater time for investments to mature comes greater opportunity and greater potential for growth and reward.
It’s a difficult task to be able to read the market and even more difficult to be able to time the market. Therefore, a concept for young people who have time on their side to understand is the importance of maintaining a diversified portfolio as this reduces your exposure to one particular asset class, industry or economy which may be more impacted by market volatility and events.
Don’t have enough knowledge to invest
A lot of people assume that to start investing they need to have a comprehensive understanding of how the market operates and the different kinds of investments available. Whilst having knowledge and an accurate understanding of the market is beneficial, the good news is that there are many options for people who are a little unsure of where to start.
For example, Index Funds in the form of either Managed Funds or Exchange Traded Funds (ETFs) are a great beginner friendly option that gives you access to multiple shares in one product. They generally have greater stability than individual shares and reduce the need for you to compare and select single shares to purchase.
If you have been unsuccessfully trying to time the market and are looking for a reliable strategy that you can understand and trust, please click here to organise a complimentary meeting with an EPG Wealth adviser.