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My friends (mid 20s) get horrified if their portfolio loses 10%. They'd much rather have their money sit in a cash account earning 1% interest.
Meanwhile, the older folks, my father's age (55+) are heavily invested in stocks when they are nearly about to retire.
Folks over 55 who have been in the market have experienced every crash since the late 80's and know how the market comes back and that the mistake was bailing out. Depending on how they are situated with future cash flow their mix may be based on that. Lot of buying opportunity being created and older folks know that.
It flows in. It flows out. There is always more to be made. Don't worry about the short term.
I stressed about cash since my teens. It was my mother who said that money flows in and out, don't worry too much about it a couple years ago.
With the current economy, for many it can be a rough start. 2008 was harsh, and typically everyday Joe Schmo gets burned in those. Wallstreet has corrupted "investing" and merged it with speculating (trading at your finger tips with your phone!). Trading is gambling, but many think it is investing. And just like at the casinos, the cards are stacked in the favor of the house over Joe Schmo. Short term, the markets are not rational. Over the long term, it doesn't matter. Places like motley fool and others bombard you with garbage constantly (they're now in the yahoo news feed) and it is easy for those who don't know better to think those people are actually "experts." Every once in an article you get the "buy and hold strategy is dead" speil. Junk info around every corner, its more prevalent than usable info.
Currently I am 24. After the whole thing about cash flow sunk in, I've relaxed about being cash broke all the time. I no longer watch the markets or think twice about what I have in equities (have been distracted by real estate, interest rates are too low). The first batch of stuff I bought and had no intention of touching 1.5-2 years ago is currently up 45% (doesn't include dividends). Be a little above what I'd average trading, but without any stress and freeing up a ton of time (and saves on taxes and commissions).
Do a little research. Make solid picks. Then go enjoy the sun. The girlfriend will be happier.
Everything is cyclical, and has a point where it's attractive as an investment. With the advent of ETFs for precious metals, nothing should be ignored as an investment instrument. For example, platinum and palladium in my opinion have a higher than average chance for future price appreciation, assuming the global economy does not implode.
Just because the masses don't think it's a good investment don't ignore it. Look at the most out of favor sectors and invest in them. I do wish there were easier ways for the average joe to invest in commodities without using ETFs that are subject to decay that can't be trusted as a long term investment. The natural gas ETF UNG is a good example of this.
Everybody has a different understanding and risk tolerance when it comes to investing. It always amazes me that there are people who would never risk a cent in the stock market, but think nothing of going a blowing a wad at the casino.
To succeed in the investing world, you need to have intellect, patience, tolerance, and the willingness to work at it. These traits are in short supply. Most people don't want to be bothered and just want someone to do it for them.
The main advantage that older investors have is their experience over the years. You just can't replace being there before.
To succeed in the investing world, you need to have intellect, patience, tolerance, and the willingness to work at it. These traits are in short supply. Most people don't want to be bothered and just want someone to do it for them. ........
I agree here, too. I think that's why bull markets are packed with chart traders. During a bull market chart traders feel well....intelligent, patient, and even gifted. It's hard to get one of them interested in fundamental analysis.
The main advantage that older investors have is their experience over the years. You just can't replace being there before.
That's pretty much it. You've experienced the rallies, the bear markets, the risks, the rewards, the cycles and the crashes all with your own capital (this is very important). You've got some battlescars. You've seen many other markets have their heydays and then fade into oblivion. You've read up on a lot of different perspectives about different markets.
All of this knowledge builds up over time and gets stored somewhere in the back of your mind. Also, having lived through so much, you know what to expect and that leads to considerably more confidence - at least compared to when you're still just starting out. It doesn't mean you're perfect of course. But it's like learning and getting better at any other art.
Last edited by BigCityDreamer; 06-02-2013 at 06:33 PM..
That's pretty much it. You've experienced the rallies, the bear markets, the risks, the rewards, the cycles and the crashes all with your own capital (this is very important). You've got some battlescars. You've seen many other markets have their heydays and then fade into oblivion. You've read up on a lot of different perspectives about different markets. .
A lot of the older investors have learned to tune out a LOT of the noise that you get from the business media. Sometimes, it is a lot easier being an investor when you don't listen to the "blow by blow" details of the market.
I'm risk averse but heavily invested. I have diversified assets (stocks, bonds, life insurance, HSA, & real estate), diversified strategies, a financial planner, and I live below our means. I'm 32 years old and learned a lot from the mistakes of my father. He, like most of my friends' fathers, lost nearly everything in the 1987 market crash. He also got scammed a fictional plot of land in Kentucky, and was suckered into buying a high-miled 2-year old GM station wagon that resulted in breakdown after breakdown. My dad wasn't foolish, but I've made sure to learn my own lessons from his mistakes.
Risk has to do with behavior and attitude more than simply stocks v. bonds v. cash.
Frankly I've observed quite the opposite. I am frequently asked by young adults about buying high-priced, overvalued tech stocks. That's risky. Older generations have more money in equities, but the stocks are more conservative blue chips and other stable companies. That is not risky.
there is a study just released o people beig more risk averse start I the 90's. its even names areas where its less common .I know that studies in Europe have shown that college graduates wanted government jobs because they saw it as more secure and less person hassle I guess you'd call it. Work eight and go home; ore or less. they also identify regions where it was not true at had a lot of risk takers
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