Here's why 80s Babies Are Terrified of The Stock Market
The year you were born has a surprising impact on how you feel about money. Here’s how to make investing less scary
If you are an older Millennial born in the early to mid-80s, there’s a decent chance the stock market terrifies you.
Why?
Because how the stock market and economy performed during your early adult years has a significant impact on how you view risk for the rest of your life. That was one of the key findings from a 2011 paper in the journal of quarterly economics.
If the economy and stock market were in the tank when you were a young adult, you’d be much more likely to avoid investing.
If the reverse were true, you’re probably betting down big on Meme stocks and crypto.
When 80s babies were graduating High-school and University, they were doing so at either end of the “lost decade” from 2000 (the dot com bubble) and 2009 (the financial crisis). So yeah, Millennials have some financial trauma they might still be carrying.
Like our taste in music, we tend to share the same attitudes towards risk we had in high school. I have no advice on how you can update your taste in music (I’m still on that 2006 playlist,) but I do have some thoughts on how to make investing (a little less scary).
First, the action items
Start small. Even $25 per month can add up to more than you think over time.
Diversify. Like, properly diversify by asset class and geography.
Buy the whole haystack. Don’t waste your time and money trading stocks or doing stupid things like options trading. Buy the entire stock market at the lowest price possible through passively managed index funds.
Next, let me yell at you
STOP CHECKING YOUR ACCOUNT BALANCE. If investing seems scary to you, never check your account balance. Seeing it go up and down will lead to anxiety. Anxiety leads to fear. Fear leads to the dark side (making stupid trades.)
Do not watch or read day-to-day coverage of the stock market. Unplug from what happens in the market completely. Watching Bloomberg will tempt you to check your account balance. Go ahead and even delete the stock tracking app from your phone. You’re investing for decades from today, so what happens today is irrelevant.
Finally, a piece of wisdom
Don’t invest to get rich.
My wife was terrified of investing, and it wasn’t easy to convince her to get started for two reasons.
As I just said, it scared her.
She didn’t care about being “Rich”
It took me a long time to comprehend that second point? Who wouldn’t want to be rich?
Clearly, my wife is a better person than I am.
So, I tied investing to something she did care about; us being able to retire at the same time. She has the best pension you can imagine through her employer. That meant that she would be able to retire before I could, so I showed her that if we started investing today, we would have enough money to retire at the same time.
Getting rich meant nothing to her until she could see how it helped us get something she did care about.
So, if investing scares you. Ask yourself this question: How could investing and building wealth help you get something you do care about?
If you have questions, let’s talk about this in the comments.