Why Aren’t More Millennials Investing In Stocks?
Why aren’t more millennials investing in stocks? Millennials are those individuals born in the 1980s and 1990s…many the children of baby boomers. The largest financial mistake young people are making today is not investing in stocks! According to one recent survey… only 26% of millennials are investing!
Many Millennials Distrust The Stock Market
Why is there this reluctance among young people to invest in stocks? Many millennials have fear when it comes to investing in stocks. According to an Investopedia article, “almost 40% of this well-off cohort stated they believe investing is “risky,” with nearly a quarter labeling it “overwhelming.” They should try to get over this fear of investing so they can grow their money.
This distrust of the stock market prevents many from getting started investing. A recent Forbes article points out that not investing in stocks could hurt the millennial generation in the long-run.
Many Millennials Do Not Possess Investing Knowledge
Many millennials are still reluctant to enter the stock market. One major reason is they do not have the financial knowledge to invest in stocks. One reason for this is our school’s lack of teaching financial education to our students. Students were not taught how to invest. This shortcoming in our schools needs to be addressed!
Millennials would do well to learn how to invest in stocks! With the advent of technology, it is easier than ever to open a brokerage account and research companies online on financial websites such as Yahoo Finance or Google Finance. Technology has also made it easier to check your stocks, get stock alerts and news with the apps on your cell phone. Wise millennials would also do well to read everything they can get their hands on related to investing in stocks. Knowledge is power!
Millennials Are Investing Too Conservatively
According to a Fidelity survey: “42% of millennials are investing conservatively, compared with 38% of Generation X investors and 23% of baby boomers.” Millennials are saving “differently” than baby boomers. The older generations, on the other hand, have “less” money in conservative investments and tend to invest more in stocks.
Younger people are losing money by placing their money in low-interest bearing checking and savings accounts. After taking into consideration inflation and taxes “conservative” investments, such as cash and bonds, could cause little or even no returns on millennials monies! Saving this way is missing out on the higher returns stocks offer an investor long term.
However, the good news is that millennials are saving and planning for their retirement early. Many millennials worry that they will not receive Social Security when they get older. Or, if they do receive it it could be in the form of reduced benefits. Yet, most of their savings are invested “conservatively” in cash, bonds or money market funds. Investment vehicles such as this can be a losing proposition long-term.
Millennials Should Invest Early
Millennials have a huge advantage by investing early. Doing so gives compound interest a chance to grow over time. Compound interest is reinvesting interest in lieu of paying it out. In other words, it is interest on interest. Investing at a younger age also gives your dividend-paying stocks a chance to grow.
In addition, historically, millennials should know long-term investments in stocks have exceeded every other investment vehicle! Stocks are the best investment when it comes to good returns on your money! Historically, stocks have done better than bonds and cash investments!
In conclusion, many millennials distrust investing in stocks. This reluctance to invest could prove “costly” in the long run. Millennials should not make the mistake of giving up the higher returns that stocks offer long-term! The key for millennials is to start investing, as early as possible, for maximum investment returns.
Unfortunately, cash and bond investment returns will not outperform stock returns over the long-term. Many millennials are unaware of this fact! A history of the stock market has demonstrated the superiority of stocks long-term over all other investments.
