While waiting at a favorite Greek restaurant recently, I struck up a conversation with two other young men in line. We started talking about investing, and both said the stock market terrifies them. As teenagers during the 2008 financial crises, they had witnessed their parents’ losses. As young adults today, they don’t want to lose their own money. Many young adults share their aversion to investing, according to a recent CNBC report by Sean Carter. Unfortunately, there can be financial risks to being risk averse.
Only 37 percent of Americans 35 years of age and younger invest in the stock market, according to Carter, compared to 61 percent of those older than 35. Having such little exposure to stocks at a young age can be detrimental to one’s financial future. Saving in “safer” vehicles does not always bring the growth needed to maintain the quality of life you will want or need in retirement.
While there are risks associated with investing in stocks, there also are proven strategies which help mitigate that risk. The market only does one of three things every day – go up, go down or stay the same. Investors who employ asset allocation with a diverse group of investments and maintain a long-term investment horizon typically see their investments grow over time. Having a proper financial plan also reduces stress and helps you decipher how much risk you should be taking.
It is our duty as parents, relatives and friends to help educate the young adults in our lives. Taking the time to have such conversations can be the positive impact they need to become financially successful.