A s a young adult investing in my future, I have heard many variations of the same advice.

“You’re young; you can take big risks in your investments.”

“Don’t worry if you lose money, you have plenty of time to make up for it!

My response is why would I want to spend my lifetime making up for lost money when I could be building on (compounding) continual growth?

A 401k plan is one of the best ways for young professionals to begin to build this continual growth. Not only are we saving the money we have earned, but most of our companies will offer a “match” program as well to encourage us to do so. As I have also been advised several times in my early days as an adult, investing in a 401k plan is “free money,” after all.

The intimidation factor with a 401k plan is how does it work? What do I do? Where do I put my money? Will someone do it for me?

In response to these questions, a common approach to 401k investing that is suggested to those just starting to save for their retirement is to invest 100% in equity. With no diversification in a plan, the risk goes through the roof. This is where the belief that since I am young, I can make up for any large losses later on, comes into play. Why should I ever want to lose my money at all?

If there is a way to invest my money in funds that will continually grow my savings, accumulating more over my lifetime, then why would I choose any other approach?

Sure, being young can make me a little fearless with my money since I have never seen any large losses, but if I can avoid ever having those large losses, while still gaining the returns,
then I will choose that approach every time.

All of that being said, age should not be a factor when deciding how to invest and save for the future. We should all want to save as much as possible and lose as little as possible so that when we are of age to retire, we have set ourselves up to continue the lifestyle we have been living while employed, just with more free time!

Inexperienced and younger investors do not have to be risky and aggressive. Experienced and “mature” investors do not have to be safe and conservative. We can instead all just be smart with our investment decisions and make the most out of our money.

-Stefanee N. assistant editor