It’s becoming a common refrain that people don’t like to invest anymore. Particularly if you’re a young woman in the millennial or Gen Z camp, you may have gotten the idea that this simply isn’t an activity for you. This may sound somewhat exclusionary, but it’s actually grounded in perfect sense: It’s generally accepted that the reason young people don’t invest is that they’ve seen how badly it can go. Young adults today grew up with the 2008 financial crisis — and now have the COVID recession to contend with on top of that!
The psychology is easy enough to grasp. We came of age in financial turmoil, and as a result, many of us have an ingrained distrust of the very idea of investing. As sensible as this is, however, it’s also counterproductive. Financial crises happen, but as we put it in a past piece about how to invest in your pretty self, “the reward for investing is more freedom.” It is important to invest assets that will appreciate, because not doing so quite simply leaves you with less financial freedom (and, plainly, less wealth) than you might otherwise enjoy.
This discussion has to do with more than the decision of whether or not to invest though. Another consequence of young people’s bias against investing is that we often don’t really know how to go about it! To address that problem, I’ve put together a few ideas for how first-time investors can ease into this sort of financial practice.
For those who like the idea of investing, but want nothing to do with any sort of traditional market, peer-to-peer lending has emerged as an interesting option. This is a process that matches up investors and borrowers, so that both parties can get what they’re looking for. As the investor, you can choose individuals or businesses to fund, lending some of your money — your investment — in exchange for an eventual return with interest. It is possible, in some cases, to go a bit further with this kind of venture, and perhaps negotiate for a more long-term investment, or even a permanent stake in a business that interests you. For the simple version though, you can find any number of reputable P2P lending platforms that will match you up with a borrower and get you started.
Commodities can also make for interesting investments for those who would rather avoid stocks or ordinary markets, or who are just looking for more stable options to get started with. While they’re certainly capable of crashing (just see crude oil earlier this year), commodities can sometimes be less volatile, and less easily impacted, than stocks. So for some, the relative simplicity of investing in an asset like gold or silver, or even coffee, can be appealing. The process tends to be fairly simple as well, given the number of commodity brokerage services there now are across the internet. Still, don’t mistake this for a claim that commodity investing is necessarily easy. It’s just a little bit simpler than some other options, and can thus appeal to beginners.
The forex market houses the worldwide currency trade, and it can actually be somewhat dizzying to beginning investors at first glance (or at least, it was to me!). This is a high-liquidity market featuring currencies and traders from around the world, and it is always active. However, a beginner can simplify the process of forex trading by opting instead for contracts for difference. Forex CFDs don’t require that you rapidly buy and sell currencies with the rest of this frenzied markets. Instead, they only demand that you stake your claim as to whether a currency will rise or fall in value relative to a counterpart over time. If your claim is correct, you earn a return. Trading forex CFDs can involve the most popular forex pairs as well (meaning you can focus on major currencies that are easiest to learn about), and can also involve leveraged trading (meaning you can trade with more value than you actually deposit). All in all, this makes for an interesting and even fun environment for beginners.
There’s An App For That
Finally, if you do want to brave the stock market for what some might refer to as a “traditional” investment, you should know that, as they say, there’s an app for that. Actually, in this case, there are a whole lot of them. Investing apps have become trendy in recent years basically because they offer more control and lower costs to users. As a beginner, you can set up market positions with minimal deposits and without paying the burdensome fees you might get with a traditional broker. With some apps, you can even take advantage of automated suggestions, or expert tips — meaning you’re not really trading alone, at least to begin with. The stock market itself can still be fairly intimidating, and is difficult to master. But the apps do make it more accessible.
Again, it’s understandable why many young adults today are wary of investment. We have every reason to be. But this doesn’t change the fact that investing can still be a good way to expand your financial horizons and grow your wealth. The options listed above may or may not be the best ways for you to profit through investment. But if nothing else, they can help you ease into this practice without being overwhelmed or intimidated.