What’s stopping you from investing in the stock market?
Despite the evidence of some fairly sizable ‘push factors’ – namely super-low interest rates crippling the benefits to be had from savings accounts and a series of measures making it tougher to accrue an income as a buy to let landlord – many of us fear taking the plunge and putting our money in the hands of the markets.
In some respects, this appears to be a generational issue. The ‘baby boomers’ have been well-versed in making their money go further through stocks and shares but millennials have not.
That was certainly the finding of an American study carried out by Bankrate.com.
It discovered that only 26 per cent of under-30s are investing in stocks – compared to 58 per cent of people aged between 50 and 64.
While a lack of money was a problem – 38 per cent of 18-30s felt that they didn’t know enough about the market, the highest proportion of all categories asked. In a separate study, reported by USA Today, only nine per cent of millennials would describe themselves as ‘investors’. It’s likely that the recession – sparked by the banking crisis – is fresh in the minds of these nervous investors as it has had a significant impact on their adult life.
A lack of knowledge – and a more cautious mindset – are important factors, therefore.Yet as fed up millennials search for ways to make their money go further, what might help them to feel more confident about the potential in the market?
Here’s some food for thought:
Step 1: You don’t have to risk thousands
Ok, so young people don’t feel like they have big pots of cash to invest. But it’s important to realise that you can still get a decent return from a relatively modest sum.
As The Guardian notes, as little as £50 a month can be invested in unit trusts. It quoted Justin Modray at Candid Money, who advised:
“Look for a fund that spreads your money across a blend of shares, corporate bonds, commercial property and commodities to reduce risk.”
The article also demonstrates how investing £100 a month in a FTSE 100 tracker that returned 5% a year after inflation, would deliver about £88,000 after 30 years, or £152,000 after 40 years. Seeing the large potential reward to be had from putting money into the markets (while still appreciating the risk) is important to win over those who have not yet taken the plunge.
Step 2: Learn the lingo
Don’t know your futures from your forex? Sometimes it can feel like the market speaks a different language to the rest of us – and this might be why so many millennials feel in the dark. This is where sites such as Investopedia can come in incredibly handy – with handy definitions and descriptions of all the key terms you’ll come across. Many of these are easier to understand than they sound.
Step 3: Try before you buy
Would a trial run make you feel more confident? Providers such as IG offer you the chance to run a demo trading account, practicing trading CFDs and spread betting with virtual funds. You’ll see the same charts and data as you would when you’ve put real money into the market – but will get a chance to see what would happen without the risk of losing a penny.
This experience, a greater knowledge of the terminology and an appreciation that relatively small amounts can deliver a decent return should help those who harbor a fear of trading, especially among a younger generation that is reticent to dip its toe into the market.