Why Young People Avoid Investing In Stocks

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I talk to a lot of people about investing and try to help them understand the benefits of investing in the long term. Unfortunately, many people listen, but rarely do they take action. The reason? Fear.

There is still an inherent fear in the minds of people, especially young people, who feel that investing in the stock market is gambling. There is a a total disconnect and a lack of trust, or perhaps ignorance about the stock market and what it actually represents. Too many think its a rigged casino where the 1% take your money away. The rest just see it as a money losing proposition. It’s just better to buy a house right?

Emotions

The biggest hurdle that young individuals have to investing is the emotional aspect. On one side of the equation are those who treat their money like their first born child. The fear of losing even a penny is too painful to bear. It’s like rubbing salt on an open wound. Perhaps this is true since it is so hard for young individuals to earn a proper wage, when prices for housing is forever increasing and good paying jobs are scarce. But all those things don’t make for good excuses when young individuals have so many earning years left and time to recover from market corrections.

Fear is what stops so many from actually investing. Despite the fact that markets have risen over time, many still doubt that the stock market can continue to go higher. Just look how stock market indexes are already at all time highs. It can’t keep going up like housing prices can it?

House Lust

If you live in Canada, you’ll know that more than half of young individuals want to buy their own home, even though prices are at all time highs. The difference between stocks and houses is the belief that houses always go up in value. Yes, that’s what most people want to believe. Those in America probably think otherwise after their housing crash in 2008 wiped out any wealth that home buyers had gained.

The emotional want to buy a house keeps money locked up in a high interest savings account making 2% a year. Everyone is waiting for that house market correction that will never come. Folly to the fool that keeps hoping to one day make a down payment on an overpriced asset, just to see all the potential gains of investing in a diversified portfolio just fade away.

There is a strong belief in many young people that houses are the only good investment one can make. The recency effect of home prices having risen by more than 100% in the last 5 years has driven most people to invest in real estate over stocks. But can real estate continue on this upward trajectory when interest rates rise and wages continue to fall?

Ignorance

There are so many tales I hear from people how stocks are a Ponzi scheme. “Only the rich people benefit.” Or perhaps the most popular quote of all “it’s just like a casino for gambling”.

All of these comments are truly nonsense and come from the mouths of ignorant people. Do they even understand what the stock market represents? The issue that most people have is that they want to make money fast. Fast means gambling. When we think about gambling we always know it’s a losing game. Therefore stock market = gambling. QED.

People think investing is like playing roulette at the casino. You randomly pick a stock and hope you hit the jackpot. These are the people that shouldn’t be buying individual stocks in the first place. The pure ignorant play is what gets most amateur investors into trouble. “I lost everything on Nortel”. “I lost everything on Corel”. The Ponzi scheme naysayers are the ones that probably did just that. Randomly pick stocks and lost their shirts. Thank you for proving your ignorance.

Lacking Funds

I agree, living in any large city is expensive. There is never enough extra money to spend. That’s why I suggested that those that are couples are better off, yet many young people are deciding to stay single for whatever reason. Get a roommate. Live on less. Go have dates in a park. There are many ways to scrounge up a little extra cash.

I see many people lining up daily to buy $4 lattes and $10 lunches when it’s probably better quality to just make it at home. Yeah life sucks, but it sucks even more in the future when you’re in debt up to your head, with a mortgage you can never expect to pay off and daycare expenses that cost more than your salary.

It’s true that if you have a good paying career, saving is much easier. It’s also much easier to compound that money into a large amount if you’re patient and live below your means. I hate to be cruel, but it does make a big difference what career path you choose and who you decide to network with. Surround yourself with successful people if you want to be successful.

Poor Financial Literacy

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Poor financial decisions are made every day by young individuals because they lack proper financial literacy. If there is anything that I regret it’s that I spent too much money when I was younger. Some would say that you should live a little, but in that short time of 10 years, I could probably be enjoying a much better lifestyle than I have now had I saved and invested earlier.

Heck, maybe I could be retired by now like those Millennium kids rather than having to continue to work for another 15 years. Never let the power of time pass you by when it comes to investing. The later you start, the closer to never achieving financial independence you will be. Remember that the best time to start investing was yesterday. What the heck did you end up doing yesterday?

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