Part of the benefit is simple: We need to boost young investors' overall exposure to equities. Alast year found that only 37% of young adults owned stocks in 2017 and 2018, down from 52% before the 2008 market crash. Apparently, the effects of the global financial crisis and recent stock market volatility linger in their psyche.
Stocks may sink from time to time, but over the long run they go up. Say a millennial invested $1,000 in the average blue-chip U.S. stock fund on Oct. 9, 2007, when equities slipped into a bear market. Yes, that original investment would have shrunk to $460 by March 9, 2009. But by Dec. 31, 2018, that original $1,000 investment would have grown to $1,750. That's $700 more than they would have earned had they "played it safe" in three-month Treasury bills.
Stocks rise more frequently than they fall. Even in the worst decade for the markets since the Great Depression, from the dotcom crash in 2000 through the end of the Great Recession in 2009, the market rose in more years than it fell — 6 out of 10. And since 1926, what is now the"Timing the market" is bad. Some of the worst years for equities have been followed by some of the best years. For instance, the S&P 500 rose more than 26% in 2009, after falling 37% in 2008.
"Time in the market" is good. If an 18-year-old is gifted $1,000 in a blue-chip stock fund today, and then invests just $1,000 more every year for the next 49 years, and keeps reinvesting the gains, he or she would wind up with $1.2 million by age 68. This assumes that blue chip U.S. stocks will continue to deliver 10% annualized returns, as they have since 1926.
It just goes to show how valuable an investment gift can be. While savings bonds may seem quaint today, they played an essential role in rebuilding the confidence and finances for families who lost wealth and faith in the aftermath of the Great Depression. In the aftermath of the global financial panic and Great Recession a decade ago, an investment gift in stocks or a fund can teach real lessons in why it pays to invest early and stay invested.
acorns It’s also important to teach young people about ethical investing. Putting profit above the planet isn’t a responsible message. Is acorns ever going to offer a product for sri/esg investors?
acorns Agreed, we have too many clueless young adults who spend on wasteful consumerism. Things they don’t need, but they want. All because it’s easy to do in this internet age. Compound investing is easy to do. Download the Robinhood app. Buy & trade stocks of brands you like.
acorns Smarter concept to teach young people is that the federalreserve is corruption on steroids They are ruining your future. The US Dollar is worthless garbage and NEVER INVEST one cent LONG in the BIGFATUGLYBUBBLE of SCAM erica. CNBC is NOT your friend!
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