by Alyssa Oursler | October 28, 2013 6:00 am
Conventional wisdom is that Millennials are too broke or scared to play the stock market.
After all, around two-thirds of college graduates finish school in debt, while the average debt load at graduation is around $27,000. On top of that, unemployment for those aged 16 to 24 is around 15% — more than twice the national rate.
And beyond dollars and cents, a recent Nationwide survey indicates that even if Millenials had money they wouldn’t trade stocks. Nearly three-quarters of Gen Y respondents said they were “extremely afraid” of investing in the stock market — more than the national average, and more than those afraid of skydiving or even death!
Still, that doesn’t mean young investors should be sitting on the sidelines. While moving out of mom’s basement is an understandable priority, investing wisely even on a small scale can play a large role in building future wealth — and the sooner you start, the better.
Here are five reasons why Millennials need to overcome their fears and doubts and consider investing.
1. It matters. Finance, economics and the stock market may feel foreign, but they’re not. Simply having a job and going to the grocery store means you’re part of the economy — and learning about stocks and the market will help you understand the world you live in. Thinking about how Facebook is making money each time a user logs in, for instance, or how large profit margins are on a new tablet will make you a more informed consumer and employee, as well as a more informed investor. Besides, if you have time to play fantasy football and Instagram your dinner, you have time to invest; having the discipline to focus on stuff that matters is a skill best learned as soon as possible.
2. Time is on your side. You have plenty of time in terms of saving for retirement, and you should take advantage of it. Younger investors don’t just have the benefit of more time to recover any losses, but also the benefit of time to generate compound interest. A person who invests $50 per month starting at age 25 will end up with almost double the retirement money of someone who invests $100 per month starting 20 years later.
3. You can do it. The world of finance may seem overwhelming, especially considering the sheer size of the global economy or the revenue stream of a company like Walmart. But the key is having the confidence and curiosity to sort through all the noise — attributes that will also help you tackle other complicated issues sure to come your way later in life. And remember: There’s no substitute for experience. Reading a book on stocks is great, but it’s not the same as actually being in the market and experiencing its ups and downs firsthand.
4. You have the money. If you save just a dollar a day, get just a 3% return on your initial investment and invest an additional $365 each year, you’ll have a nest egg of more than $18,700 after 30 years. Plus, even if you have loans to pay back, investing may still be a better move than paying down that debt early. Pay back a loan with a 3% interest rate faster than scheduled, for example, and it’s the equivalent of getting that 3% return on your investment. Around three-quarters of the way through the year, the S&P 500 has already gained nearly eight times that. And don’t fall into the trap of thinking you can save later to make up for things. Putting a little to work today can be more important than simply saving a lot down the line.
5. You’re all you’ve got. The days of pension funds are long gone, and Social Security has its risks. Recent reports say it could be bled dry by 2033 … if not sooner. With that in mind, your financial future is 100% in your own hands. Sure, you can call a financial planner or have an expert handle your assets, but even those decisions ultimately fall on you.
The bottom line: If you’re still shaking in your boots, get over it. And if you simply think you have all the time in the world, think again.
For Millennials, there’s no better time to start investing than right now.
Alyssa Oursler is an Assistant Editor at InvestorPlace.com. Follow her on Twitter @alyssaoursler. For more practical investing advice, sign up for InvestorPlace’s Young Investors e-letter.
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