Young Investors: Excited Or Apprehensive?

Young people have a generally positive view of investing, with many recognising the benefits of starting early. However, there are still barriers to investing for young people, such as the cost of living crisis. While some young people are deterred by short-term financial concerns, others are keen to take advantage of compound interest by investing early and consistently.

Young investors tend to be more influenced by friends and family than social media, with conversations about finances being an important trigger for investing. They are also more likely to take risks with their investments, particularly in stocks, cryptocurrencies, and riskier assets.

Overall, while there may be challenges, young people who invest tend to feel positive, interested, excited, empowered, and confident about their financial decisions.

Young people are more influenced by friends and family than social media when it comes to investing

While social media is the second most popular source of investment information for young people, with YouTube, Instagram, Reddit, Twitter and Facebook being the most used channels, it is clear that the influence of friends and family is more significant. This may be because young people trust the people they know to give them reliable advice, or it could be that they are more likely to take an interest in investing if they know that people close to them are already doing it.

Another reason for the influence of friends and family could be that young people feel they need advice and support when it comes to investing. With investing often seen as a complex and risky activity, it is understandable that young people would want to seek guidance from people they trust. Friends and family members who have experience of investing can provide reassurance and help to explain the process.

It is also worth noting that young people are not a homogeneous group and their behaviour will vary depending on a range of factors, including their age, level of financial literacy and individual risk tolerance. For example, teenagers who are starting to invest will often do so with the help of a parent or guardian, while young adults in their twenties may be more independent but still value the advice of friends and family.

Overall, while social media plays a role in shaping young people's attitudes towards investing, it is clear that the influence of friends and family is more significant. This may be due to a combination of trust, personal connection and a desire for guidance and support when navigating the complex world of investing.

Young investors are more likely to feel interested, excited, and confident about investing

Young investors can harness the power of compounding, which is when investment growth in the form of dividends and/or capital gains is reinvested, earning them more interest over time. For example, a single $10,000 investment at age 20 would grow to over $70,000 by the time the investor turns 60 (based on a 5% interest rate). That same investment made at age 30 would yield about $43,000 by age 60, and made at age 40 would yield only $26,000.

Young investors also have the flexibility and time to study investing and learn from their successes and failures. They can take on more risk in their investment activities, as they have years of earning ahead of them. This means they can build more aggressive portfolios that are subject to more volatility and stand to produce larger gains.

Additionally, the younger generation is tech-savvy and can use online tools and resources to their advantage. They can use online trading platforms, chat rooms, and financial and educational websites to study, research, and apply investing techniques.

However, it's important to note that young investors should also be cautious and well-informed when investing. While they may feel excited and confident, it's crucial to do thorough research and understand the risks involved.

Young people can benefit from the power of compounding by investing early

For example, if someone starts investing for retirement at 22 and consistently sets aside $100 per month with a 10% return on their investment, they will have $710,810.83 by the time they are 65. However, if they had started investing at 15, they would have $1,396,690.23, or nearly double the amount.

Young people also have more time to recover from any investment losses. This means they can afford to take more risks with their investments, which can lead to larger gains. They also have more time to study the markets and refine their investing strategies.

Additionally, young investors can take advantage of tax-advantaged tools such as 401(k)s, 403(b)s, and IRAs to further their financial goals. These accounts allow individuals to invest on a tax-deferred basis, meaning they don't have to pay taxes on the money they put into the plan until they withdraw it.

By starting to invest early and consistently, young people can harness the power of compounding and set themselves up for financial success in the future.

Young investors can afford to take more risks and aim for higher returns

Young investors have a distinct advantage over their older counterparts: time. The longer the time horizon for investing, the more time investments have to grow and benefit from compound interest. For example, a single $10,000 investment at age 20 would grow to over $70,000 by the time the investor turns 60 (assuming a 5% interest rate). This is more than double the amount that the same investment would yield if made at age 30.

The benefit of time also means that young investors can afford to take more risks with their investments. While older investors approaching retirement age may opt for low-risk or risk-free investments such as bonds and certificates of deposit, younger investors can build more aggressive portfolios that are subject to more volatility but also stand to produce larger gains.

Young investors have the flexibility and time to study investing, learn from their successes and failures, and refine their investing strategies. They can also take advantage of their tech-savviness and use online trading platforms and tools to research and apply investing techniques.

Additionally, young investors have the opportunity to invest in themselves by earning a degree, receiving on-the-job training, or learning advanced skills. These investments in human capital can have strong returns and increase their ability to earn higher future wages.

While it may seem daunting to start investing at a young age, it is important to remember that even small investments made early on can have a significant impact on future financial goals.

Young people can use online tools and resources to learn about investing

Young people have a lot of options when it comes to online tools and resources to learn about investing. Many young people are interested in investing, and there are many resources available to help them get started.

One way to learn about investing is through online investment simulators and games. These can help young people understand the terminology and mechanics of investing in the stock market. Websites like How The Market Works, TD Bank Virtual Stock Market Simulation, and Virtual Stock Exchange offer simulation games alongside articles and tutorials about personal finance and investing.

There are also many online courses and tutorials available. For example, edX.org offers a free online course by Purdue University that covers investment, credit, insurance, and retirement through four modules using real-life examples. Similarly, Khan Academy offers free tutorials on topics such as investment risk and returns, and early retirement investing.

Additionally, young investors can access podcasts, such as "We Study Billionaires" and "Millennial Investing" on the Investor's Podcast Network, which provide casual learning about investments.

For those who prefer reading, there are numerous websites with articles and tutorials about investing, such as Morningstar and Bank of America's collaborative resource, Investing Classroom.

Finally, young people can also use online tools offered by their workplace retirement plan providers and investment companies. These often include webinars, presentations, and other planning resources to help make informed decisions about retirement investments.

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