Invest Aggressively While Young

October 30th, 2007  |  Published in Retirement

Do you know why the experts recommend that young investors should be aggressive while older investors should be more conservative? It comes down to the fact that in the long run the stock market, and investments in general, appreciate but in the short run they can be entirely random and extremely volatile, so if you can stick out the roller coaster, because you have more years to wait, then you can take the volatility and perhaps take advantage of the higher growth rates.

Take for example a hot new technology or biotech company. In a single day you can see double digit gains or losses, over a week can you see it double or half its value, but if you are willing to wait a year, two years, ten years; you can potentially see even higher growth rates than if you invested in a blue chipper. Blue chippers are nice if you want the steady reliable growth, solid dividends, and a consistency you won’t find with hot new startups. The standard deviations will be smaller, the stock prices will be smoother, and overall the company won’t give you heartburn. However, if you think in the long term, how will a startup perform over 20 years, you’re hoping to ride that growth in their market share as well as their stock price. It’s that large growth, plus the ability to weather any downturns because you have the luxury of time, that you are banking on and what young investors should use.

When you are young, all you have is time… take advantage of it.

  

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