Time is Money for the Young Investor

It's a great time to invest.

Time is Money

Oh, to be young again. For one, I would go back and correct some investing mistakes. When I first started investing in a 401 (k) plan I opted for mostly bonds, which was way too conservative for a young investor. Don't make the mistake I did, advises Kiplinger's Erin Burt.

Although the stock market is still scary (despite its recent upswing), if you've got decades before you retire, don't let the recession chase you away from equities. Read more in If You're Young, Rock the Recession (July 19).

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/17/AR2009071703814.html?wpisrc=newsletter

If You're Young, Rock the Recession

By Erin Burt
Kiplinger.com
Sunday, July 19, 2009

If you're older than 40, you would be forgiven if you took the glass-half-empty view of the economy. After all, your retirement account has been decimated, your home's value has plummeted, your credit has dried up and your job may be teetering on a cliff.

But if you're in your 20s or 30s, you have time to rebound from any personal setback and even use the crisis to your advantage.

It's a great time to invest.

Yes, the stock market has been in the toilet lately, but that's what makes investing so attractive, especially to first-timers. As of July 8, the Standard & Poor's 500-stock index stood 44 percent below the all-time high set on Oct. 9, 2007. Yes, that's a good thing -- for you. You have 30, 40, maybe 50 years until you retire. That's plenty of time to come out ahead. The stock market has never lost money over a 30-year period. Even if you had invested in 1928, before the Great Depression, you would have earned an average annual return of about 8.5 percent over the next 30 years, according to T. Rowe Price.

You can get a deal on a home.

Median home prices have dropped about 25 percent since 2006, with some metro areas seeing values drop by more than half, according to the National Association of Realtors. Mortgage rates are also near record lows, making for smaller monthly payments. Plus, Uncle Sam is sweetening the deal with a tax credit worth up to $8,000 for first-time home buyers.

Your career options are still open.

The nation's unemployment rate topped 9.5 percent in June. And hiring for new grads has slowed significantly. But this is a minor setback when you're young, compared with the blow it would be if you were older and more established. In fact, the recession may lead you to explore life and job paths you might not have considered otherwise.


You haven't put down roots, yet.

So it's easier for you to move to where the jobs are. Job markets in big -- and pricey -- cities, such as New York, Chicago and San Francisco, have been hit hard. But look at opportunities and a more affordable lifestyle in such places as Albuquerque, Austin, Charlottesville and Huntsville, Ala.

Excessive debt is passé.

Conspicuous consumption is out. Frugality is in. In recent years, we hardly saved a dime (zero percent, actually). Now, with the economy in the dumps, Americans are saving nearly 7 percent, according to the Bureau of Economic Analysis. Getting in the habit of saving money and spending wisely in your 20s and 30s will pay dividends for a lifetime.