Why young people should invest in the stock market
We often think of investors as professionals with significant savings who also have a hefty 401(k) or individual retirement account. It doesn't take much money to invest in the stock market, however, and young adults, even college students, should consider it.
According to Cornell University business professor Richard Martin, students looking for new ways to supplement their income of pay for graduate education may benefit from trading in the stock market.
"Nobody at a young age generally thinks that they need to start thinking about retirement," Martin told the Cornell Daily. "The earlier you start, the far better position you are in by virtue of being ready for retirement and the less money you need to put in later on."
He continued, "85 percent of your retirement income is based on how well you invest and therefore compound your savings."
Since students and young professionals are unlikely to be experienced investors, Martin cautioned that they may not yet be ready to manage an active portfolio that requires frequent trading. Transaction fees can be costly and students usually don't have the time to thoroughly research multiple companies.
He also suggested that young investors use Standard & Poor's 500 as a resource, as the index captures the market value of large and profitable companies. In addition, the S&P is expected to increase in the next few months, signaling higher returns for investors in those companies.
Young investors and others who are new to trading in stocks should not be afraid of the financial market. With SmartStops' investment analysis and portfolio management software, you can stay up to date about important changes. To learn more, please explore our website.