Why Young People Shouldn’t Hesitate to Invest
If there is one word that is nowhere near a millennial’s vocabulary that would be investing. Some millennials might be aware of the importance of saving and investing, but they aren’t necessarily keen about doing it. For some others who would want to try to actively manage their money, the problem is they don’t know where to start. Perhaps, the good starting point for all of these is understanding the reasons the young people are too hesitant to jump in the investing bandwagon and why they shouldn’t hesitate at all. Below are some points to ponder.
Why young people hesitate
1) The young people are busy
Their minds are lenient to here and now decisions. Definitely, investing is challenging and it requires discipline and dedication. The young generation are spending too much energy on other things and so, learning about investing is not in their current scheme of things. The same goes with spending their money on the things they think they need such as expensive gadgets, branded clothes, etc. They put off investing because they are not yet financially stable.
2) The young people are risk averse
Investing can be an extremely uncertain undertaking for any youngster. This explains their risk aversion or simply their fear of failing. This is an unknown territory that they are not likely to dive into. They’d rather keep their money on the bank – a conservative vision regarding saving money. Also, they are burdened by the necessities thus ideas about future-oriented strategy are not entertained.
Evidently, there are obstacles to investing, well, at least for the young adults. These are their too-focused-on-the-now mindset at the expense of their future, conservative vision regarding savings, spendthrift lifestyle and overall lack of urgency to save and invest. Not to mention the possibility of their being ill-informed about proper budgeting.
What should be done
Now, let’s talk about why young people must overcome these barriers. Yes, it is possible. As a youngster, there are two main things to remember.
- Knowledge is foundational
- Age is not a factor for learning
True they say that knowledge is power, and this is one thing that we can subject ourselves into regardless of our age. You are afraid to invest, thinking that you might ‘lose it all,’ because you are unprepared. You might make some mistakes in the process. With learning, however, you would be able to develop your skills in discerning criteria and making sound judgments. Through this, you can minimize the risk and maximize the gains.
You may reason out that even when you learn everything about investing (which is also impossible), you are basically inexperienced. While this may be true, there are many ways to overcome this challenge. Online, there are several investment tools like investment forums, wealth management websites, and simulation investment platforms. So, this should be covered.
What are the advantages
Twenty-somethings may realize more early investment advantages compared to forty-somethings. The young don’t realize it, but they have the most important resource – time. That’s why you – youngsters – must not waste your precious time by investing now. Early investment is more beneficial because
ROI is not very important, saving rate is
For novice investors, the amount of money that you can save is much more important than the returns. This is not to say that return on investment (ROI) is not important. It’s just that you have more free funds now that you would 10 to 20 years from now when you have your own family, house, car, business, etc.
Compounding works favorably
When you put your money to work for you the earliest possible time, chances are, you’ll generate more wealth from it. More wealth is created and yet the cost of investment is kept at low rates. The longer the time that this money is working for you, the better your financial status will be in the future. Money invested grows substantially hereafter including share values, dividends, and interest.
Losses are minimal
Depending on how you proceed and which investment products you chose, know that losses are a part of investing dynamics. That’s why experts always advise budding capitalist to start small by choosing a product with lesser associated risks unless you are highly risk-tolerant. Anyhow, since you are starting small, your losses are also small. With that, build your investment portfolio slowly.
Investing might be an absurd idea for the youngsters. However, the mere fact that you are delaying investing is a serious mistake that can impact your future. Put simply, investing early in your life means a better future for you, much better than what you can imagine. Learning is the key here.
This image is courtesy of Mfxcenter.