In your 20s? Investing should be boring (and 2020 hasn’t helped)
As somebody now in my mid-30s, I look back on my 20s and realise I made one fundamental mistake with money…I didn’t invest in my future hard enough.
And I’m somebody who is very good with money – budgets, saves and has no debt other than a mortgage.
It’s only in the past couple of years that I’ve realised how much I’ve been missing out on preparing for retirement, or ‘future proofing’ my lifestyle.
In your 20s? Investing should be boring. And that’s the challenge.
Let’s face it. Anybody beyond the age of 29 will look back on their 20s and realise they really didn’t know it all, despite what they felt at the time.
Everything is exciting. We want to be free. Find our place in the adult world. Live for the moment. And often tell anybody who thinks they know better to f*** off.
Unfortunately, when you’re in your 20s and the world is full of colour, thinking about investing in your future (and even thinking about retirement) is pretty dull.
To make matters worse, the appeal of short-term stock market gains has never been higher, and access to the stock market has never been easier.
The stock market has become trendy…which makes it particularly dangerous for young ‘investors’.
But getting excited about the stock market is the first sign you’re likely to make a mistake with your so-called investments. And 2020 didn’t help.
2020 – the year we all suddenly became ‘experts’ in the stock market.
Timing the market had never been so easy in March 2020. The value of the stock market fell off a cliff following lockdowns across the globe in response to COVID-19.
Stocks were relatively cheap and if you’d never invested in the stock market before, the spring of 2020 was a great time to buy.
I know lots of people who lumped cash into all sorts of companies, believing that the value of the shares would rise and give them a quick profit. And when they did, they thought they were God.
But this is nothing more than speculating – gambling on an outcome.
Speculating and trading really isn’t sexy
The problem with the unique situation during the first round of global lockdowns was that anybody could have stuck money in a fairly stable company experiencing a temporary blip, and jump on the rebound.
It gives you a rush, and just like any sort of high, once you come down from that high, you want to experience it again.
And for virgin ‘speculators’ in their 20s who experienced the highs of ‘beating the market’ in 2020, it might not be great for their long-term future.
Online ‘expertise’ is booming…and it’s targeting an impressionable generation.
You only have to look on forums on Facebook or Reddit to see how easily uneducated people can get sucked into the thrill of buying stocks and shares. Or watch YouTube videos on influencers telling you how much they’ve earned from their own investment portfolios (because so many people are searching for ‘how to make money’ on stocks and shares apps).
Trading 212 is the app that’s leading the way in making the stock market very accessible to novice investors. The fact it’s called Trading should be a red flag. And I have nothing against Trading 212 – it has lots of educational elements and you can practice on fake funds.
But the problem is this:
Trading is for highly experienced professionals with detailed knowledge of the markets. And even then there is never any guarantee the trades will pay off in your favour. It’s a time-consuming and highly-pressured job.
If you’re in your 20s and think you can trade your way to more money on an app, be very, very careful. You’re young and impressionable. And apps like Trading 212 should only be used by people with the right attitude. You’re only a click away from ballsing it up.
Emotional investing? Then it’s not really investing
Investing for your future is really a passive behaviour.
You want to remove your thoughts and actions from it 95% of the time. A sit-back-and-wait approach is best. Even when things might not look great. History has shown us that the waiting game pays off.
And that’s why to every 20-something year old I say this:
Want to invest? Start with your pension.
It really is the most passive form of investment you can make and shouldn’t be taken for granted. Don’t think about the fact that you’re 50 years away from retirement. Or that you’ll inherit lots of cash from your parents. Or that by the time you retire the state pension will be enough for you.
Check out how your pension can give you additional investment income here.
Of course investing for retirement doesn’t sound sexy when you’re young and want to spend your money on exactly what you want.
Lose your ‘want it now’ mindset. It’s tough when we’re used to getting everything instantly these days. Patience has become a lost characteristic.
But if you’re wise enough to understand the benefits of investing in your pension early in your working life, then you have the characteristic of a true investor. Remember what I said about the waiting game paying off? With a pension, you have to wait. It’s the law.
And my final piece of advice…don’t worry about trying to fit in. Don’t try to do what somebody on the internet did because they sound cool. Most of the crowd at your age won’t be thinking about their long-term future. What’s trendy now rarely lasts. And pensions have never been trendy.
Strike a balance - enjoy your youth, focus on your own self-development and start planning now for when your tits or balls are down to your knees.