Kids these days... making risky investments that don’t pay off
This month, we looked at investors’ performance by age group. The average Openfolio investor returned ~6-9% this year. Younger investors? Less than half that. Even more striking? They took more risk and volatility only to arrive at lower returns. As Oscar the Grouch said, it’s not easy being green.
Why? Firstly, young people make more speculative investments. Specifically they invest in more single stocks instead of funds or ETFs. Meanwhile older investors buy more funds. By stock picking, young investors might be buying what they like. Aometimes a good pick might beat the market, but on average they don’t. For every Apple (AAPL up 42% this year), there is a Twitter (TWTR down 30% this year)
Beyond just stocks, young people are also hotter on risky assets such as Bitcoin. Meanwhile, older investors largely stay away from such speculation.
The important takeaway? It's generally accepted that younger investors, who have more time to let their money ride out the market waves, have a higher tolerance for risk than their older counterparts. But in the short term, this higher risk does mean having to accept the possible outcome of having more varied returns. So just because these risks haven’t paid off this year, doesn’t mean they might not later. An even better silver lining? Our data shows that investors’ DO get better with age.
For more, check out Openfolio!