When it comes to younger investors, I’m often asked…“Should I invest my savings in growth investments?” That’s a tough one. Why? Well because, just like any investor you probably want your investments to make you big money without any risk, right?
If you’re that kind of young investor, then look out, because you’re exactly the kind of person the investment industry is looking for. It’s that little thing called greed, and they can see it and you coming from a mile away. And they’ll take advantage of it while soothing your fear of losing your hard-earned savings.
You see, the investment industry knows something you don’t. They know that until you have actually suffered an investment loss, your sense of greed is stronger than your fear of loss. It’s pretty simple.
In this 4 week series on growth investments, I’m going to take you through the marketing hype, the math, the 30 year investment cycle, and the current cycle to clearly illustrate why growth investments are not a wise investment for young investors.
What is a Growth Investment?
Growth investments include:common shares, mutual funds, Exchange Traded Funds (ETFs) and segregated funds. Growth investments are generally considered to be riskier since they do not have any guarantees. Meaning that the value of the investment is not guaranteed; the income paid by the investment is not guaranteed, and there is no guarantee that the invested savings will be returned.
Should Young Investors Invest in Growth Investments?
So back to the question. Should young investors invest their savings in Growth investments?
Well, after working as an investment advisor for 26 years, I not only know what the investment industry’s answer is (it’s a big “yes”), BUT I also understand their logic and their marketing strategies. But here’s what you need to be aware of first….
Before You Leap
Marketing Advisor logic 101: “With your young age and long investment time horizon, you can afford to take on the higher levels of risk that growth investments present. If the stock market declines and the value of your savings drops, you will have lots of time to recoup those losses.”
Now, how sound is that logic! In other words, what they’re saying is this: “Invest in risky assets when you are young so that when they lose your money, you will still have time to recover from those losses!” Huh? Does that make good sense to you? It shouldn’t.
Marketing Advisor logic 102: “Time is your greatest asset.”
Yes, for the young investor time is your greatest asset, but not for the reasons they’re giving you! Time is your asset, so exploit it wisely. Do not waste or ignore it, especially when it comes to your savings and investments. Because you have time on your side, you don’t need to take unnecessary risks with your savings. Time is a luxury that gives you the ability to slowly, easily, and safely grow rich.
Be Aware of Marketing Tactics
Beware of the industry’s marketing literature. The reason they may not give you balanced advice is because they make big money from growth investments…and they make very little from stable, conservative investments.
If your advisor’s paycheque, next bonus, or promotion depends on the company’s revenue and profit, which investments do you think they’re more likely to recommend? Growth investments (with lots of revenue and profit) or safe, conservative investments (with not so much revenue and profit)?
Which one do you think they’ll go for? Read: Growth Investments for Young Investors | Do the Math, where I take you through the math (numbers don’t lie) behind why growth investments aren’t a wise move.
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