Young and Full of Confidence - Not So Fast


February 8, 2011
Written by: Michael Kittinger

This Money Magazine article discusses how the recent Recession may have permanently altered young investors’ confidence in the market, much like the folks who came of age during the Great Depression. Many young investors had some, if not most, of what little they had been able to accumulate in the stock market. For quite a few of these people, they lost their jobs and steady income and saw their savings/investments get decimated – at a time when they needed the money the most.

As someone about to leave their 20s, I have certainly thought and wrestled with how much stock exposure I’m comfortable with, especially after the market volatility, scandals, SEC investigations, etc. we’ve had the past few years. Ultimately for me, I’ve decided to continue investing in stocks as I think that is still the best long-term strategy. But the Recession has made me reevaluate and increase what I have set aside in savings – so I know a certain dollar amount will be there, regardless of what the stock market is doing.

Couple of key takeaways from the article:  

Twenty-somethings are the least confident among all age groups that stocks are the best place for investment gains and the most likely to choose a bank CD over stocks for retirement savings, according to a new survey from Wells Fargo. Studies show that investors who regularly monitor the market earn worse returns than those who avoid information about their portfolios. Why? News reports tend to overplay the importance of any piece of info, prompting investors to overreact-- they panic and sell at a market bottom or buy in at lofty prices. All of which damages returns.

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