Why You Should Invest in The Stock Market While You're Young
I know it’s hard for us 20-somethings to plan ahead for the future, heck I can barely plan for tomorrow. But when it comes to our money, the only way to gain financial freedom is to plan for tomorrow. You must think two steps ahead with your money, otherwise you will end up in the same spot five years from now that you’re currently in.
“But Sean, how can we plan ahead with our money?!”
Don’t worry friends, I am here to highlight one way you can get ahead with your money. This way is to invest in the Stock Market. I know, for a lot of people “Stock Market,” sounds like that thing that old people in suits who still read the newspaper deal with. But the truth is, anybody can buy and sell individual stocks.
HOW:
Simply sign up for an account on websites like E-Trade, Fidelity, or the one I use, Scottrade. When you sign up for one of these accounts, you add an amount of money to your account and can begin trading, each trade will cost a certain amount of money, somewhere between $5-$10.
WHY:
The Returns Are Greater Than Your Savings Account
According to a CNN Money Article, the average savings accounts annual percentage yield (APY) is only 0.06%. To make it easier to understand, if you were to put $100 into your savings account, an average savings account would only return you 6 cents in interest for the year. At the end of the year, your $100 would be $100.06. Not that exciting.
The average return for the S&P 500 since 1926 is close to 12%. For those that aren’t mathematically gifted, 12% >>>> 0.06%. That same $100 would look more like $112 based on that average return.
From DaveRamsey.com
“From 1992–2011, the S&P’s average is 9.07%. From 1987–2011, it’s 10.05%. In 2009, the market’s annual return was 26.46%. In 2010, it was 8%. In 2011, it was -1.12%.”
What we can take away from this is that the stock market provides much greater returns than a simple savings account. It may take a little more work, but it can be well worth it the time spent.
Investing Keeps You In Touch With The Economy
When you keep up with the stock market and your investments within the market, you begin to get a better feel for what our economy is doing. What sectors are strong, what sectors are under performing. Now that it is election season, the economy is a hot topic, but what does that mean? With an eye on the stock market you will see better what is taking place that drives these issues.
The Younger, The Better
If you’re in your late teens or early twenties, there is no better time to start investing. What do you have to worry about? You only have to concern yourself with your own finances, no family to worry about and no mortgage to pay. Young is the time to take a little bit of risk with your money. And as much as the risk seems to be, there isn’t that much risk! We are talking about investing money that you would otherwise use to buy items that will entertain you for the time being, so if you lose a little bit then so be it, you’re young and still learning!
It’s Fun!
The stock market is about as exciting of a thing that you can do that requires you to do just about nothing. Once you make a trade you watch and wait for that next opportunity that just may mean a jump in your net worth. While the Wolf of Wall Street is a little over the top when it comes to the fun to be had in the stock market, the ever changing landscape of the market will keep you invested not only financially but mentally.
Get Out and Start Trading
It is important to note that you won’t become a millionaire overnight just because you begin trading stocks, but there is a lot greater chance you build a great deal of wealth overtime in the market if you start out young. Now we aren’t talking about trading penny stocks, we’re talking buying and selling solid companies that you put some research into before making any moves.
As something to keep referencing when beginning your endeavor into the stock market, check out the guide made by TheStreet. It really does a good job answering many of the questions you may have about trading stocks.
If this song doesn't get you in the mood to start trading, I don't know what will.