Misconceptions of investors who are young

There are many beliefs and misconceptions that are held by young investors today. Often great opportunities are lost because of this. Generally investing seems demanding, risky, and boring. They frequently view investing as something for others who are more aware, older and at a certain stage of their life. Like any other excuse, they rationalize their avoidance concerning not investing and often miss great opportunities to grow their wealth.

Today we will look at a few of these misconceptions that are often just excuses. To the young and the wise, what are you really waiting for? Stay in the “now” and go for it. Information and help are just a click or a phone call away.

“Not enough funds, I am still too young." 

Young investors should take baby steps toward investing; “every mickle mek a muckle” is the saying. It is the norm to wear brand name clothing and go to expensive parties, not to mention buying the latest phones which, if we were to add up the unnecessary expenses, would amount to a small fortune. This is money which could have been used to purchase select stocks, unit trusts and mutual funds. Yes, I understand most young adults have loans and are inundated with debt. Even on a tight budget we cannot over emphasize the fact that large sums of money are not necessary to start investing. Start investing your money when you are young. It is possible to invest small amounts and still have a diversified portfolio.

“I have very little knowledge regarding investing." 

Young investors after years of studying should never use lack of knowledge as an excuse. You have information at your fingertips through your phones, tablets, computers etc. After studying and entering the work force, you have the skills to research the unknown or the unfamiliar regarding investments. Information is available on websites, webinars, and YouTube. Ignorance is never an excuse regarding investment decisions.

Investment equates to Risks

Young professionals/investors are often turned off by recent economic and global challenges. In an economy such as ours, and taking into consideration the news in the media, they may see the timing as not right. This is a common mind set for young investors. Investing is risky, however the risk can be managed by evaluating your risk appetite. If it is low, you can select a conservative portfolio versus a high-risk portfolio which can also be tailored to your needs with bonds, stocks etc. The higher your risk tolerance, the higher the potential for gains. If the losses occur, being young is a benefit as the recovery time is much longer.

“When I am older, I will start investing." 

Time waits for no man. When you are young, this is the best time to make investment decisions and take some risks. You have many more years to learn the market, take risks, and recover from losses if they occur. Lessons learned when younger give an investor more time to recover than older investors so do not wait until you are older to start. Also, by the time you realize it, you are indeed older and behind the eight ball.

"Investing is for old people." 

This perception is tricky, when young investors who are considered next generation investors see their parents’ successes and others in the media. The wealthy investors seem much older, however, behind the success stories of many, they will tell you or you will read that their success started out when they were young and willing to take risks and chances. The media is sometimes misleading with their portrayal of many successful investors. I have had many meetings with parents/ grandparents in formal settings with their young children and grandchildren discussing investing and training them to be aware of the importance of investments. "You are never too old to start investing (or saving for retirement)," the opposite is true as well: people are never too young to start investing.

The Bottom Line

The facts are that young adults are often distracted with many frivolous activities, hobbies and busy with friends. This distraction can be costly, and can rack up a significant amount of debt and burden before you realize it. Investing will help to steer you in the right direction regarding building wealth and security. Despite these common misconceptions of young people about investing, those who start investing young and stay focused on the long-term gains, with the aid of a good investment advisor and research, will have many advantages over those who wait, including the power of compounding and the ability to weather a certain degree of risk.

Lisa Minto is the Assistant Vice-President, Personal Financial Planning at Sterling Asset Management. Sterling provides financial advice and instruments in U.S. dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at www.sterling.com.jm

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