In the last few years, a trend has become more and more apparent: youths have started investing en masse. In Nieuwsuur and an article from NOS, Professor of Corporate Finance at Erasmus School of Economics Patrick Verwijmeren appeared to analyse the factors contributing to the trend and to talk about its possible downsides.
The pandemic seems to be the trigger for many young people to start investing. According to Verwijmeren, this has to do with a few factors. Since interest rates on saving accounts are low, other options to make money work for you are more appealing. One of these alternatives is the stock market. Digitalisation is a contributing factor as well, since one’s access to investing has never been so simple: a smartphone is all you need. In addition, it seems impossible to evade news on Bitcoin and other crypto currencies to a lesser extent. Bitcoin is booming, which attracts people to investing in it with attractive return rates and capital gains.
Possible downsides
However, Verwijmeren warns that there is also a downside to the increased accessibility of investment opportunities. Many young (and older people as well) are not fully aware of risks and volatility of investments. Apps like Bucks seem to add a gaming element to investing, which may lead to people losing sight of their real objectives and the long run. It is very important to determine what the amount of risk that you are willing to take. Opposite to active investing, passive investing requires less extensive knowledge and mainly a long breath. In an article from evajinek.nl, Verwijmeren gives his advice on investing in ETFs, which in his opinion is less risky and worth it in the long run. Are you interested in passive income and the meaning of the FIRE movement? You can find his advice here.
