I started investing in the 2010s when the stock markets seemed to be unstoppable. What could go wrong? A viral pandemic, that’s what. Stock markets crashed spectacularly in March 2020 as Covid-19 took hold.
This was my first downturn as a millennial investor, but plenty of other young people were about to join me in what would become a remarkable period for money markets. Shares thought to be basket-cases, like old-school gaming retailer Gamestop, soared thanks to speculative behaviour stirred up on social media platforms like Reddit.
Meanwhile, cryptocurrency has become not just a goldmine but a belief system. Bitcoin hit record valuations before dropping at a hint of doubt expressed on Twitter by Tesla wunderkind Elon Musk.
Disillusioned, unconfident and left behind
This is an intoxicating environment for young people, who had a relatively rough deal following the 2008 financial crash. Most young people feel disillusioned, unconfident and left behind in the economy. When we did engage with our finances, we would encounter our parents’ doctrine of the two Ps – property and pensions.
That may have worked out for the baby-boomer generation but for us? Not so much. Property prices have escalated well beyond earnings in most areas, while generous pensions have become mostly gold-plated yore outside the public sector.
So, I understand why my generation has started investing to try and jump ahead on the monopoly board of modern finance. Plus, the sooner young people start engaging with investing, the better. It’s what we are doing through our auto-enrolled workplace pensions, and history shows having a multi-decade stake in the markets is more lucrative than bunging your cash in a savings account.
The Ronan Keating principle of investment
But while fortune favours the brave, it doesn’t favour the reckless. You can do worse than follow the classic advice: diversify, drip-feed, and keep your costs well below 1%.
I’ve also adopted what I call the Ronan Keating principle. To paraphrase one of the singer’s biggest hits, you do it best when you do nothing at all. That doesn’t mean neglecting your portfolio (particularly when underperformance and high costs drag on) but it does mean refusing to chuck your entire strategy when you see a bad headline or some gloomy commentary on social media.
Solicitors and lenders are already rejecting first-time buyers who try to use Bitcoin bounties for deposits.”
It’s not just what you invest in but how you invest. Taking advantage of big tax breaks on pensions and Isas (particularly the Lifetime Isa, if you’re a home saver) is key.
This is a major reason we need greater awareness and rigorous regulatory warnings about the risks of cryptocurrencies. Besides their volatility, I’m not sure people will be able to crystallise gains without huge tax implications and upshots for their housing ambitions: solicitors and lenders are already rejecting first-time buyers who try to use Bitcoin bounties for deposits.
When it comes to investing, you’ve got to start somewhere. But investing is a marathon, not a sprint – one in which it pays to be the tortoise, not the hare. Get informed, be patient and screen out the noise. Follow this advice and trust me – you won’t regret it.
Iona Bain is the founder of Young Money Blog and author of “OWN IT! How our generation can invest our way to a better future”.