You hear it all the time: Buy low, sell high. Maximize your returns. It sounds great, right? You get all of the upside of investing (rising values) with no downside (falling share prices).
But you, young investor, cannot do this.
Now, there is no law, no regulation, preventing you from buying and selling as you want. However, being able to time the market- that’s impossible.
Most professional stock pickers get average, to just above average returns. Many lag the market for several years. Honestly, it is impossible to know whether stock prices will go up or down. In fact, when companies report their earnings, the price can drop even with good numbers because they did not surpass Wall Street expectations enough.
This is silly, right? Earnings beat expectations, but shares drop in value. It happens every year.
Now, this article isn’t a treatise about why stocks should respond in a certain way based on certain conditions. What I am hoping to show is that news, no matter how good or bad, can move a stock price unpredictably. Thus, buying or selling assuming a high or low in the stock price is not investing but gambling.
As a young investor, it is extra important to build a solid investment base. This is why so many people say to just keep putting money away into index funds, no matter the stock market. I do pick companies specifically to invest in, but I am broadly diversified, and my goal is to build dividend income.
Research companies of index funds you like, and put money away slowly, over time. Assuming a 7% average rate of return, which is below historical returns for the market, a $5,000 investment will be worth over $70,000 in forty years. Seriously. Just put it away and forget about it.
Over the course of your second year, but $5000 away again, but put a little in every month. You have no idea if the market high or low will be in January, or August. So just put a little away. Over the course of forty years, it will average out. And you will capture the market lows when you put money away.
Gen Z Finance 