The AFM (Dutch Financial Market Authority) discourages youths from investing in the stock market. Investing, however, offers young people an excellent opportunity to improve their financial position.
A few weeks ago, the AFM warned young investors about ‘serious disappointments’ in the stock market. ‘We do not have a crystal ball, and we certainly do not want to incite panic, but we feel we must caution that the stock market has good and bad periods, even though a drop in stock market value seems almost impossible right now’, said Tom Smiers of the AFM.
That the stock market has good and bad times is, indeed, true. Even though they deny this was the objective, a message such as this does discourage young people. However, is the AFM warning justified? Nope!
Investing is super important, particularly for millennials and Gen Z. For them, it is one of the few remaining ways to improve their financial position!
It would be better if the AFM were to improve the financial situation of youngsters so that investing is no longer ‘necessary’
The generations before us could count on a stable basis through a permanent contract or a house of which the value steadily increases. Student debts, shortages in the housing market, flexible contracts and forced self-employment has removed this stable financial basis for most millennials and Gen Z youngsters.
The solution? Investing. In index funds in particular. A way to accrue capital that is easy to understand, does not require large sums of money (you can start with ten euros a month), and that offers a 7 per cent annual return in the long run. If you invest for less than 20 years, you may have top-years with profits as high as 20 per cent annually, as we have had in the past few years. But you could also have losses of 20 per cent per year, as was the case when the dot-com bubble burst or in the 2008 financial crisis.
Rather than discouraging youths from starting to invest under the ruse of ‘protecting them from great disappointments’, it would be better if the AFM were to improve the financial situation of youngsters so that investing is no longer ‘necessary’. Investing is currently the only remaining option this group has to build a stable financial basis. And making mistakes when you start investing is simply part of the deal!
Emma Mouthaan (26) is a master’s student of Molecular Nutrition and Toxicology and is also taking a master in Writing at the VU. Emma blogs on studying and finances on the website The Stingy Student. Previously, she wrote about fashion and food.
