SINGAPORE — Why should youths start investing as soon as they can? Is investing the same as saving? Whatever your answer, there’s no denying that investing has always been a stressful topic, but yet also increasingly becoming a trend for young people in recent years.
This is second part of a series where we speak to several financial experts to hear their thoughts on why young adults should start investing and find out some general investment trends among them.
Increased interest in investing among youths
Singaporeans have cultivated a more digitally-driven lifestyle during this COVID-19 pandemic, and this has resulted in an increased interest in investing among Singaporeans.
According to brokerage firm Tiger Brokers, more Singapore investors tried online trading during this period and there was a three-fold momentous growth in account openings during 3Q 2020 as compared to 2Q 2020.
What is striking to note is that Gen Z make up for 15% of the company’s current 900,000-plus customers worldwide and 30 per cent of Singapore’s total customers. In particular, Gen Z investors have an 80:20 split between traditional stocks and real estate versus volatile stocks and options, and prefer long term stocks like Apple, Boeing and Carnival.
As of Q3 2020, the most traded stocks by Gen Z in Singapore are Tesla, Apple, NIO and MedTech International, Tiger Brokers said.
With such a trend, should youths really start investing when they’re young?
The financial experts that Yahoo Finance Singapore spoke to all agreed that young people should indeed start investing from an early age.
Why you should invest when you’re young
The most obvious advantage that millennials have over the average investor, is well, their youth.
In other words, millennials have more time to invest before they actually need to use the money for major life purchases like a home, a car, to raise a child or for retirement.
“While there is no ‘too late to learn’ concept, it is always good to start learning and investing early, and gain as many insights as possible on how the process works and what the risk factors are,” said Eng Thiam Choon, CEO of Tiger Brokers Singapore.
“Learning to invest at a young age could also instil potential financial independence and discipline.”
Eng also acknowledged that this depends on the risk tolerance of the individual.
“The main benefit of learning how trading works when you’re young would be the ability to understand movements of the market and the broader global economy – information that one needs to be equipped with to make a sound investment,” said Eng.
However, he added this would only be successful if the individual is able to harness the full potential of compounding interest and make it a priority to establish and follow an investment plan.
“Younger, more junior investors typically earn less than their older counterparts, and therefore initially have less to put toward their investments,” said Gregory Van, Founding Partner of Endowus, a Singapore-based financial technology company.
“To follow an investment plan is much easier said than done, but breaking this pattern is critical to starting early and getting the most out of the limited time they have for their investments to grow”, added Van, 30.
Know what you’re doing
But while youths are encouraged to start investing while they’re young, these financial experts have also cautioned that one should know exactly what they are doing.
According to Tiger Brokers, Gen Z investors gear towards ‘creating a globally diversified investment portfolio’. This means that while some might prefer to put their money in the bank, there are others who choose to endeavour in investing.
“One needs to be clear that investing is not the same as saving,” advised Eng.
“Before dabbling in investments, youths should familiarise themselves with the paper accounts first or begin saving money with a cookie jar concept — to save slowly first and accumulate wealth before investing.”
Youths today also have the added advantage of technology and the Internet which comes with easy access to resources and up-to-date information for them to make informed decisions before entering the stock markets.
“Consumption patterns are changing for Gen Z investors, especially when they are born in an era where the internet buys convenience,” said Eng.
However, this also leads to a worrying trend of Gen Z investors following investment fads such as chasing hot tips and putting money in something just because their friends are doing it.
“It’s very tempting to get excited about the latest buzz, but there is a big difference between speculating and evidence-based investing,” said Van at Endowus. “Taking the time to learn the difference will reap rewards for a lifetime.”
Ultimately, while youths are generally encouraged to start investing young, they have to also be careful and aware of what is happening to their money and make informed decisions.