Generation Y’s Biggest Investment Mistake

MillenniaAccording to a CNBC news report in April 2015, young investors, or the millennials known as Generation Y, need to overcome their jaded outlook about stock investments and financial markets. Experts believe that many of the young investors are chasing after the wrong stocks with expensive consequences. One portfolio manager summed up the younger generation’s biggest investment error.

He said that many young investors are putting their money in such exciting and expensive names as Tesla and Twitter rather than looking at stock investments more conservatively. However, there are also a large number of Generation Y Americans who do not invest in stocks at all. According to a Bankrate.com survey, just over 25% of people under 30 are stock investors. That number is low when you compare it to the number who invest between 50 and 64 years old (58%).

Surveys show that the younger generation is not a financially astute group of people and, for the most part, distrust stocks and the markets. However, these people, who were born in the early 80s to late 90s, can lose out on the opportunity of time by sitting complacently on the financial sidelines. That’s because the major value proposition of young investors today is a compounding interest rate. Therefore, the biggest benefit connected with investing for young people is a lengthy horizon of time.

When you consider the market has risen by 2,000% since 1985, that is a major return over a 30-year period. That is also the same amount of time millennials are now looking at between now and their own retirement. If you are used to living through economic downturns, which millennials are, then investing conservatively in stocks today can offer exponential rewards in the future.

Most financial experts concur that the most propitious time to begin stock investing is when a person is young and can wade through the downturns as well as take advantage of compounding interest rates. The main reason that millennials are not investing is a dearth of financial knowledge, all which makes them less confident about putting money into stocks. Another reason is a lack of money.

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