I recently discussed with some friends on young people investing, shared my investment experience with a few young friends. These young friends of mine generally lament the long-term low pay and the hard-earned employment environment. Almost no one thinks that they can buy a house, get married and start a family by working hard, let alone get rich or retire early.
Don’t play the fire
Because of this, there is also a consensus among young people’s communities that investment is almost a common language, and it is a good phenomenon to have this awakening. However, young people are also in distress because of generally low wages and long working hours, and no funds on hand to invest. This has also caused many young people to take risks, adopting typical high-leverage investment methods such as margin, shorting, options, and even futures, derivatives, hoping to get rich quickly.
In fact, these are very dangerous investment methods, especially for young people with less investment experience, and they are not wise investment methods. Because these fast and highly leveraged investment methods can easily lead to bankruptcy if you are not careful; but if you do not adopt these fast and highly leveraged investment methods, at most they will only cost you all the principal invested, and it is impossible for you to lose exceeds the original investment principal.
Young people’s enviable advantage
Although funds are relatively limited; in fact, when young people invest, they have many advantages compared with older investors:
- Time compound interest: Long-term compound interest is the greatest friend of all investors, and the life span of human beings is roughly the same. This is an advantage that all young people have. Investors can only start investing earlier than others, or live longer than others. These are two ways to extend the time. James Simmons, the master of quantitative investment has an average annualized return on his career investment as high as 39.1%, versus Buffett’s 20.5%. According to the 2020 Forbes Global Rich List, Simmons ranked 36th, is worth US$23.5 billion; versus Buffett, No. 4, is worth US$67.5 billion. The root cause of such a huge gap is that Buffett began to fully accumulate assets at the age of 14, while Simmons only fully invested in investment when he was 44 years old. Simmons was late for 30 years. As of 2021, the period of his accumulation of assets is 40 years, versus Buffett’s is 77 years, almost twice that of Simmons.
- High plasticity: A young man with no investment experience is a blank piece of paper, just like an uncontaminated little white rabbit. Because of this, it has great plasticity like a sponge, with unlimited choices and opportunities; it can absorb correct investment concepts and establish its own successful investment methods. Compared with older investors, in addition to having their own outlook on life and values; in investment, they have already formed their own subjective investment methods and adopted them for many years. People are habitual animals. Once they have formed a habit, it is difficult to be changed after working with one’s own methods. This is why investors over the age of 40 have great difficulty in accepting investment methods that are different from their own. They must have great determination and greater perseverance to make it possible.
- There is a cost of failure: This is also a great advantage. Investment is basically a game of chance. What all investors are looking for is to find a higher probability of success. It is impossible for every investment to be 100% correct. Every successful investor also needs to form his own investment method, and it also takes time to make corrections in the process of establishing his own investment method.
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