Young Investors Have the Power of Compounding

Most younger investors believe its the investments you choose is the reason for reaching a successful Financial goal. The real reason is having a disciplined savings strategy. Your investments should be globally diversified at your risk level and remain disciplined to that strategy.

English: Retirement savings for various period...
English: Retirement savings for various periods with squirrel and nut analogy (Photo credit: Wikipedia)

Bruno conceded that young people face many competing savings goals such as buying a house, paying for a wedding or their children’s college education, but said retirement saving should still be factored into a financial plan.

Many things can be paid with loans, but retirement cannot, which is why retirement saving must be a priority. A post-graduate with student loans should still contribute to a retirement plan, she stated. This is not to say student loan debt should be neglected, but a plan should be in place to pay off debt while simultaneously saving for retirement. “You don’t want to necessarily shift away from retirement just to pay off student loans,” Bruno said.

Young investors might be hesitant to invest because of market performance in recent years. “Their short investment horizon has been marked by some volatility,” she noted, but emphasized that this is typical throughout history.

Young investors should not focus on market volatility because they are being exposed to it early and can still bounce back. Worrying too much about volatility can cause young investors to avoid market risk and expose themselves to inflation, she cautioned.

Bruno added that young investors should not try to time the market and chase performance.  Studies show that investors who attempt this have lower performance than those who pick an asset allocation and stick with it. Portfolios should be broadly diversified with both U.S. and non-U.S. stocks, she suggested.

The sooner you start saving for retirement the easier it will be to reach your goals. History shows that the market volatility we have been experiencing is not unusual. To succeed you will need a prudent strategy and discipline to stay the course.

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