Most young people today, such as high school kids, college students, and young professionals consider the stock market as a terrible thing. They have witnessed this stock market often going down that makes them live with a fear in investing. Unfortunately, without a foothold in the market, many young professionals are now putting themselves in a precarious financial situation.
According to virtual advisor Andrew McFadden, founder of Panoramic Financial Advice in Fresno, CA, "if your money is only in cash or cash equivalents, chances are you will not even follow inflation."
He also added that younger investors actually have their own advantages over their parents. The more time and money you have, the stronger your investment potential will be. If you are among the groups that are afraid to start investing, here are some ways to deal with your fears.
1. Get enough knowledge
Instead of avoiding investment, McFadden suggested that young investors try to learn about how the market works so they can prepare for future market conditions. Financial education should not come from news media, which tends to misunderstand.
To find out more about the stock market, young investors are advised to peruse the financial planning books in the local library or bookstore. McFadden likes The Dummies Guides. "They break things down very simply," he said.
2. Consider the long term
It is better for young investors to start a long-term approach to investment. "Leaving the stock market is not a profitable strategy for most of the millennium in the long run," McFadden said. The stock market is more volatile than ever, especially as technological advances make it easier to trade big. "Even so, if you look at the results from time to time, and you do not plan to retire anytime soon, most people will still benefit in the long term."
3. Starting from small quantities
"Instead of wasting all your money at once, start with the amount you feel comfortable with," McFadden said. "You can start multiple accounts for less than $ 1,000, which will not make or break you, but it can give you the experience to become a more confident investor."
As an ancient Chinese philosopher Lao Tzu said, "The journey of a thousand miles begins with a single step."
4. Understand your strategy
If you're worried about the market, it's important to understand how to strategize conservative investments. Most young people are afraid of the risks inherent in the market, but then they register a number of their company shares and an aggressive portfolio because someone tells them to do so.
According to McFadden, many people are advising young investors to be aggressive with their investments. But it's actually more important for you to understand your needs and have a gauge for how you'll react if the market swings 50 percent up-or down 50 percent. If you reject downswings, it does not make sense to have a large amount to allocate in the stock market. A consistent plan makes it easy to make decisions without involving excessive emotion.
As you begin to look into the future, though, the downturn in the market is overshadowed by long-term, thorough growth. If your fear of the market keeps you from investing, you may lose the opportunity to generate hundreds of thousands of dollars in potential profits. So start small, but diversified to minimize risk, and play long games. You will not regret having done it.