When millennials — those currently aged 26 to 41 — came of age in the wake of the Global Financial Crisis, young folks were reluctant to start investing, the experts said, and too conservative when they did it.
The new wave of investors appears to have no such issues. The pandemic and associated lockdowns brought with it a new enthusiasm among younger investors, who piled into the market. And those who recently took to investing aren't showing signs of slowing down.
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Among investors who bought into markets for the first time in 2021, 86% plan to continue investing this year, according to a recent survey from Investing.com. That's smart, experts say.
By getting into markets sooner rather than later, younger investors are capitalizing>First-time investors are maximizing their time in the market …
Young investors have an inherent advantage over their older peers because of the extra time they can spend in the market, Slott says.
Historically, over long periods of time, stock markets have tended to trend upward, although there are no guarantees. Still, the earlier you start investing, the more time you have to take advantage of compounding growth in your investments.
If you were a first-time investor in 2021, you began to harness the time you have in the market. And if you continue in 2022, as nearly nine out of 10 first-time investors intend to do, you increase your chances of building a robust nest egg.
Say you invested $10,000 in the market at age 30 and earned a 7% return on your money over the next 40 years. You'd end up with about $150,000 before taxes and inflation, according to Grow's compound interest calculator.
Had you started five years earlier at age 25, given the same return assumptions, you'd have $210,000.
But say you didn't have $10,000 to burn at age 25, since few do. Say that you instead invested $1,000 and then contributed $1,000 each year after. You'd still come out way ahead, with about $326,000 after 45 years.
