Should youths stay away from the stock market?

I read with great interest LP’s post on “The youth and the stock market” and comments by readers that followed. In summary, LP’s view was youths should not invest in the stock market due to lack of capital and that it’s more worthwhile to focus on other things like getting a job or studying. Let me present my views on this ongoing debate that have been spotted in forums and amongst my friends as well. Youths in this post represent people in the age range of 18-24.

It is true that most youths lack the capital as most do not have formal employment. The savings youths came from parents, festive “ang pows”, part-time jobs, NS allowances, among others. Most would have amassed around $10k to $15k by the time they are 21? $10k may not be enough to have a substantial position in a blue-chip company, many would think. For example, buying 2 lots of SIAEC would cost around $8k. Anyway, why must a youth have a substantial position? Why can’t he just buy 2 lots, like in my example, to have an “experience” with the market. If the youth has done extensive research of the company and bought the company due to the strong business fundamentals, there isn’t anything wrong with buying a stock, no matter how small the capital is. Or another way the youth can experience the market is by buying the STI ETF that tracks the STI. With $10k, he can buy 3 lots of the STI ETF to experience the market. However, before investing, one should have done a thorough research on the company and know how the stock market works. To learn that, one should read extensively.

Buying a stock due to lack of capital is not the issue suddenly. The issue now becomes the temperament of the youth. At such a young age, without formal employment, a gain of $1000 from the SIAEC or STI ETF that he bought may seem a lot for the youth. He then goes around boasting to his friends saying, “Hey! I made lots of money in the stock market you know? No need to work lah! Just buy stocks can already!”. This is the point when things gets dangerous. Dangerous in the sense that the capital gains got to his head and he thinks that he knows everything and that making money in the stock market is as easy as making instant noodles. Youths, or adults for that matter, should always have a long-term view and not be excited about short-term gains. Arrogance kills an investor. We should always be humble before the market as the market is ALWAYS right. Investors should also have patience and discipline in the markets.

To add on, by starting young, youths have an upper-hand over many of their peers who are preoccupied with other “not-so-useful” things in life. For example, Youth A is an investor but Youth B isn’t. When both reach 35, Youth A would have seen at least one full market cycle but Youth B would only have started off investing. In that aspect, Youth A has got more “experience” than Youth B and has got an upper-hand. Warren Buffett started investing at the age of 11 and he regretted not starting early. So, starting early has its benefits. Having started investing, youths should also keep on upgrading themselves by reading books, talking to senior investors, analyzing various kinds of companies and going to forums.

Thus, I strongly feel youths can always start investing young even with minimal capital. Time is on their side and time is an investor’s best friend. However, they should always be humble and experience at least one full market cycle (bear to bear or bull to bull) before coming to any conclusion whatsoever. They should have a long-term view when investing. Remember, the market is always right!

P.S. Do let me know your comments/views if you don’t agree. Don’t be afraid to shoot me down! Not literally of course..

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7 thoughts on “Should youths stay away from the stock market?

  1. Hi,
    My son is 21 years old. he is a poly-graduate in finance & accounting. I talk to him about share investment’s principles and SGX shares. He got no problem understanding what I am talking about. But he is interested only a little. Right now, he is only really very interested in playing computer games. So you see it is not a matter of age, but what is your interest is most important.
    But what is your interest will in a way determine your life’s destiny. NO?
    Anyway it’s great to be young. You are only young once. Go and do whatever interested you and enjoy.
    But it really doesn’t matter at what age you really started investing in the market as long as you understand the principle of investments:- Temperament over-rule everything.

  2. All of us go through different phases in our lives. Some things which we do at a certain age and find fascinating, we would think it is childish later in life. Perhaps that is all that LP is saying.

    If you have certain innate skills or attributes, it will manifest itself sooner or later. How many Warren Buffets are there in the world ? Most statements made refer to the average Joe. How many Sim Wong Hoos does Singapore have ? That is not to say there are no entrepreneurs in Singapore, just that there aren’t any that has made as much impression as he has.

    So at the ages of 18 to 24, the world is your oyster. Explore as much as you can rather than be fixated by money making alone. You will be better off for the journey. However, at the end of the day, the money is yours to decide how you want to spend it. I doubt many will pay attention to what LP has written. Learn a new language, travel, make new friends, widen your contacts. As what you yourself have mentioned, many may be lure by the fascination of making money without having to putting in much effort if they make some money in the stock market. For everyone that succeeded, there are many more who did not. Just look at the number of courses promising overnight riches in trading forex and stocks. Bottom line is, LP’s message is enjoy your youth.

    Li

    • Hi Li,

      I’m not in any way debunking what LP said. The post was just my 2 cents worth. I’m sorry if the post seemed rude or something.

      I feel youths who are serious about investing can still explore the world and do the things they want to, like you have mentioned, and still spend some time reading up on investing and experience the market.

  3. >>> As what you yourself have mentioned, many may be lure by the fascination of making money without having to putting in much effort if they make some money in the stock market. <<<

    That's quite true. There are many who do dream of making riches in the market without too much hard work.

    But truth is, their dreams will remain as dreams!

    Even the world's greatest investor has to work full-time to analyse and decide which are the great stocks to buy. Why would anyone think little efforts are needed?

    While youths could get started on investing, there are many other things to do too if they want to make money, especially in the area of generating seed capital for investments. A 10000% return on a seed capital of $0 is still zero!

  4. Hi FFN,

    Wow…I didn’t know my post create such a controversial issue in the blogosphere. I guess it’s a topic that is very close to heart. That’s why there are so many heartfelt comments made in my blog and elsewhere.

    Ultimately, my post is really talking about myself and my experiences. I’ve no regrets not knowing about the stock market earlier and fully ‘wasting’ my time on frivolous pursuits. There’s a lot more stories to tell about my childhood rather than talking about the investments I’ve made. That’s my opinion.

    You did mention something that I feared about starting young…it’s the idea that one can make money easily in the stock market. When one realises that the market can easily take away more, it will be too late already. I wonder if losing money at this point in time will be fruitful or not actually. I guess different people react differently to it.

    Good to read your reactions to my post :)

  5. Hi LP,

    It was an issue that was in my mind for a very long time already. It was there even before I read your post. Just that I felt very lazy to put my thoughts into words. Your post gave me the impetus to do one myself too. So many thanks to u! Cheers!

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