49% of Gen Zers Could Be Making This Huge Investing Mistake

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It’s important to invest in assets that are capable of generating solid growth. Read on to find out how you should invest when you’re young. 

If you have money you don’t need to keep in a savings account for emergency fund purposes, then it pays to put that money to work by investing it. You can do so in a regular brokerage account, a 401(k) plan through your job, or an IRA.

But if you’re going to invest, it pays to choose assets that are likely to deliver a solid return over time. And stocks easily fit that bill.

Recent data from Empower, however, shows that only 51% of Generation Z consider stocks a top asset to invest in. So if you’re a younger investor who’s been shying away from stocks, you may want to reconsider your stance.

When it pays to take on risk

There’s a reason some people are hesitant to invest in stocks. Stocks can be volatile, and when you buy them, there’s a chance you’ll lose money.

This risk is generally mitigated, however, by investing in stocks over a long period of time. The logic there is that your portfolio might lose value on a temporary basis. But if you sit tight and ride things out, you’re more likely to avoid losses.

It’s also important to remember that historically, the stock market has rewarded investors who have stuck with it. In fact, over the past 50 years, the stock market has generated an average annual 10% return, as measured by the performance of the S&P 500 index.

This doesn’t mean the stock market has had a great year every single year, though. Rather, that 10% average annual return accounts for years when the market performed poorly.

The point, though, is that on a long-term basis, investing in stocks has a tendency to pay off. So even though there’s some risk involved, it’s important to try to move past your fears and put some stocks into your portfolio — especially when you’re young and have time on your side.

How much wealth could stock investments bring you?

To illustrate the importance of investing in stocks, let’s say you’re 25 years old and invest $1,000 in stocks in your brokerage account. If your portfolio delivers an average annual return of 10%, and you don’t touch that money until age 70, you’ll end up with almost $73,000. That’s a huge increase.

Better yet, let’s imagine you invest $1,000 a year every year for those 45 years. Assuming that same return, you’re looking at a portfolio worth $716,000. That’s a nice sum to potentially retire on.

Of course, just because the stock market’s average yearly return is 10% doesn’t guarantee that’s the return you’ll end up generating with your investments. You may end up with a lower return on your money or a higher one.

The point, however, is that if you’re a member of Gen Z, it certainly pays to put your money into stocks since you have ample time to ride out market downturns and come out ahead. And if you make a point to assemble a diversified portfolio, you can lower your risk of losing money even more.

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