This is one author’s perspective on investment, and not an expert opinion.
I’m not what you’d call a risk taker. In fact, I’m more along the lines of a classic goody-goody. The worst thing my teachers would say about me on a report card was that I could sometimes get “too talkative.” The most daring thing I’d do in class would be passing notes. I didn’t lie to my parents, or get trashed at parties in high school. You get the picture.
To this day, I’m still an avid rule follower. I don’t have major regrets in life based on my behavior. So why am I painting such a lame picture of myself? Because for some reason I’m incredibly risk-averse in life, but am less so with money.
Recently, I started chatting about money on an afternoon stroll with a good friend. I was pleading with her to move a significant chunk of her money out of savings and into an investment – any investment – just to stop earning 0.01% in interest. I tried going the common sense route and explaining just how little she was valuing her money by leaving it sitting some place earning less than inflation. Then she countered with a common response: “I’m pretty risk-averse.”
I suddenly realized how much I defied a major millennial financial stereotype. I’m not afraid of the stock market. In fact, I’m afraid not to be investing enough. It bothers me to have too much of my money sitting in my savings account.
I began analyzing my bullish feelings towards money and came to the same conclusion I always do when it comes to my relationship with finances: it’s my parents’ doing.
The stock market crash in 2008 happened during my first year of college. I rarely saw my parents during this time because I lived in the United States, while they lived in China. There was no going home on weekends for me. Instead, I got to head home (to China) during Christmas vacation and summer vacation. I’d get to see my dad a handful of times in between when he’d come to the U.S. on business trips.
Suffice it to say, I never had to be around tense conversations about money as everyone started to see their stocks plummet. I was almost blissfully unaware anything was happening other than hearing the occasional senior stress about finding a job after graduation.
It’s easy to tell I didn’t major in finance or business in college.
By the time I tuned into the world’s financial panic, it had probably been about a year since the stock market took a major tumble. And yet, I didn’t feel concerned about my parents’ financial state. My home had always been relatively open about money, and while I didn’t know exactly how much my dad made, I trusted my parents would be transparent about any financial difficulties.
Still, I figured it would make sense to check in.
My dad and I were driving along in the car one summer during my family’s home leave (when we’d all visit the States). I started to ask basic questions about investing, and the panic the world seemed to be experiencing.
In his infinite wisdom, my dad turned to me and nonchalantly said how much money he and my mom lost in the market in 2008.
My mouth dropped open.
“How are you so calm about losing that much money?” I sputtered.
“Erin, you need to learn that the stock market is cyclical,” he explained. “There have been big drops before and there will be big drops again. But what gets you in trouble is when you get scared and try to take all your money out.”
By leaving his money sitting pretty, and making some savvy buys during the crash, my dad ended up coming out of 2008 very much ahead.
Many people, of course, were not so fortunate. and didn’t end up with the financial flexibility or assets necessary to leave their money in. However, as a millennial, we have the time, to take risks and not be scared of the stock market. Despite the ups and downs, we have 30 or 40 years before retirement to allow our investments to grow. This willingness to risk needs to be paired with job stability (ideally), or an emergency fund, and a back-up plan, because jobs are not always a guarantee. But it’s fortunate that we have enough years ahead of us to take advantage of the opportunities the stock market offers.
I didn’t start investing until a couple years after this poignant conversation with my dad (one big life regret I have), but his words have made me a rather bullish investor. I don’t take major risks with my investments, but I do put far more into the market than your average millennial. Dips in the market don’t send me running for the panic button. I, personally, believe investing is not only a risk worth taking, but also necessary for financial wellness. My money certainly deserves better than a high interest savings account (even those accounts with more than one percent).
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