The phrase, “youth is wasted on the young” is especially true when it comes to investing and learning about the stock market. For many people, there are distinct financial benefits to investing at a young age, as a long-term investment strategy has historically been the best path to lasting wealth.
Even with history and time on their side, many young people do not take advantage of the opportunities that are available to them, and choose to either keep their money in traditional savings accounts, or worse, not to save at all.
In my personal experience, there are many things I wish I knew about the stock market when I was in my twenties that I know today. While I am pretty sure that I won’t be traveling back in time in the near future, let me share with you the lessons I have learned, and how they can be applied to your present investment strategy.
First Thing You Learn About The Stock Market: It Is Not A Casino
When you talk about the stock market as much as I do, you get used to hearing the argument that people don’t invest because they don’t “gamble”.
The idea that the stock market is the world’s largest casino has come about in recent years as the internet made Day Trading a sport, 24-hour news and financial networks give up-to-the-minute prices for every security on the market, and “I got rich/went broke in ten-minutes” stories have garnered headlines and national attention.
The fact about the stock market is that is is not a roulette table, but a means of ownership in a corporation. By purchasing shares in a company, you can participate in that company’s success, and profit from their increased growth and profitability.
This logic seemed to go out the window on several occasions in the last few years, notably with the dot-com bubble in the late 1990s and early 2000s, and the housing and credit collapse of 2008. Between questionable stock valuations – remember Pets.com? – and complicated financial instruments the market has provided investors with nauseating price swings, and fleeting wealth.
The main lesson about the stock market that can be learned here is that it pays to ignore the fad-du-jour, invest in fundamentals, and implement a long-term investment strategy. While Hollywood will probably not make a blockbuster movie out of a buy-and-hold investment strategy, you will be happier and wealthier in the long run by adopting this approach.
Learning About The Stock Market Is Not As Difficult As It May Seem
A major road block for many young people is that learning about the stock market may seem difficult at first. While there certainly is not shortage of information when it comes to investing, the market’s fast-pace, variety of investment instruments, and seemingly incomprehensible jargon can be intimidating.
With everyone from financial planners to hip-hop stars to your over-caffeinated neighbor offering “hot” stock tips, and “sure-thing” investments, it can be near impossible to figure out where to properly invest your money.
As with most things, learning about the stock market will take some time and effort, and you should start with the basics and work your way up to triple inverse ETFs. Practice makes perfect, even in investing, and many online brokerages offer practice accounts that you can use to familiarize yourself with the basics of investing before you commit real capital.
Small Investments Can Add Up Over Time
Even if you do not have a large chunk of money to invest in the stock market, you can make small contributions that add up over time. In your twenties it is possible to amass a considerable amount of wealth by committing as little as $15 a day.
While many people in their twenties are not earning as much as their older counterparts, they are also free from most of the major financial obligations facing people even just a decade older. While being child or mortgage free may lead you to spend more freely on extras such as dinners out and yearly vacations, this financial freedom could be channeled into planning for a more secure future.
No matter if retirement seems to be very far away, or rapidly approaching, it is never too early or too late to start investing your money, and be on your way to true wealth and financial freedom – no time machine required.