When Generation Z thinks of investing, they often picture institutional investors – the so-called finance bros in their high-rise Wall Street offices. For many young people, investing seems like a distant concept, something that will become relevant only when they are planning for retirement. However, the reality is that the world of investing is open to everyone, and starting early can lead to significant long-term benefits.
Contrary to popular belief, investing is not just for the wealthy elite. It’s an avenue that can be explored by anyone, regardless of their financial background. George Kailas, CEO at Prospero.ai, emphasizes this point, “Investing isn’t just for millionaires in fancy suits. Our parents, our friends, the world around us is involved in the investing world. But, deducing where and how to get started can be a challenge. For many young folk entering the workforce, the idea of investing seems so distant in the future. The reality is, the earlier you start investing, the better. I started when I was 13 and that played a big role in my early career success.”
Indeed, the earlier you start investing, the more you can benefit from the power of compound interest. This principle means that the returns on your investments start to generate their own returns over time, leading to exponential growth. For example, if a 20-year-old invests $5,000 in an index fund with an average annual return of 7%, that investment could grow to over $74,000 by the time they are 60. The same investment made at age 30 would only grow to about $37,000 by age 60. This highlights the importance of starting early.
A recent survey by the National Association of Personal Financial Advisors found that 66% of Gen Z respondents expressed a desire to learn more about investing, yet many feel overwhelmed by the available options. This sentiment is understandable, given the myriad of investment products and strategies out there. From stocks and bonds to real estate and cryptocurrency, the choices can be daunting.
To navigate this complex landscape, Kailas suggests that understanding your financial goals is the first crucial step. “Are you looking to learn? Are you saving for retirement, a major purchase, or simply looking to grow your wealth? Are you looking for a brick-and-mortar place or are you looking to do it on your own via an app? Different providers specialize in various investment strategies, so aligning their expertise with your objectives ensures you get the most tailored and effective advice,” he advises.
For many Gen Z investors, technology plays a vital role in making investing more accessible. Mobile apps and online platforms have revolutionized the way people invest, allowing users to manage their portfolios from their smartphones. This convenience appeals particularly to younger investors who are accustomed to using technology for nearly every aspect of their lives. One such platform, Prospero.ai, aims to democratize investing by providing AI-driven insights and personalized recommendations, making it easier for novice investors to make informed decisions.
Another factor contributing to the increased interest in investing among Gen Z is the rise of social media and online communities. Platforms like Reddit and Twitter have become hotbeds for investment discussions, where users share tips, strategies, and market analysis. The GameStop saga in early 2021, where a group of retail investors from the Reddit community r/WallStreetBets drove up the stock price, demonstrated the power of collective action and the impact that individual investors can have on the market.
However, while the accessibility of information and tools is a positive development, it is essential to approach investing with a critical mindset. Not all advice found online is sound, and the volatility of certain investments, such as meme stocks and cryptocurrencies, can lead to significant losses. It’s important for young investors to do thorough research and consider seeking guidance from reputable sources.
Investing is not a get-rich-quick scheme but a long-term strategy for building wealth. By starting early, setting clear financial goals, and leveraging the power of technology, Gen Z can take control of their financial futures. The journey into the world of investing may seem daunting at first, but with the right approach and resources, it can be a rewarding endeavor that sets the foundation for lifelong financial success.
As Kailas aptly puts it, “Investing isn’t just for millionaires in fancy suits.” It’s for everyone willing to take the first step and embark on a journey toward financial empowerment.
Photo by Kelly Sikkema