Why This Bear Market Is An Amazing Opportunity For Millennial Investors

Why all investors should treat this down market as a golden opportunity.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Volatile markets sending financial pundits into panic mode, banks telling clients to sell everything, the FTSE covered in red ink day after day. It may seem counterintuitive, but for investors, and especially millennials like myself, this scenario is an amazing opportunity to begin putting cash into the stock market.

Millennials today have one advantage that can’t be replicated by even the smartest hedge fund manager or algorithmic trading model: the power of time and compounding interest. Albert Einstein rightly described compounding interest as “the eighth wonder of the world”. Buying shares now and giving them 40 years to grow in value is the surest way to ensure a healthy nest egg when the time comes to retire.

Start now

And the time to begin socking away savings is now. Don’t put off investing by saying you’ll get around to it when you’re earning more later in your career. Thanks to the miracle of compounding, at age 65 each pound you put away at age 20 would have historically doubled in value compared to a pound saved at age 30. The Motley Fool’s own Morgan Housel explains the numbers behind this in a great article.

But how to begin? The FTSE 100 is down 15% over the past year, unfairly dragging down with it shares of otherwise great companies. All investors, but particularly those of us with years ahead of us before retirement, would be well served by beginning to sift through the wreckage for bargain purchases. However, if you’re just starting out and don’t want to dive right in to buying individual shares there’s an excellent alternative. Buying a low-cost FTSE tracking index fund allows you to own the entire the market while you learn more about shares and investing.

If you’re ready to look for bargains, great blue chips such as Royal Dutch Shell, GlaxoSmithKline, and HSBC can be bought at valuations cheaper than the FTSE 100 at large. With diversified revenue streams, global reach and 5%-plus yields, these could form the backbone of a great portfolio to hold for decades. Although they’re not the most exotic of shares, reliability and simple business plans are exactly what legendary investors such as Warren Buffett and Peter Lynch look for in their investments.

Golden opportunity

The benefit of not needing to draw on our investments for several decades means that not only do our portfolios have time to recover from dramatic drawdowns, but that we should view times like these as a great opportunity to buy more shares at low prices. Whether it’s individual shares or index funds, the most important action to take now is to start saving whatever you can and letting your money work for you, rather than the other way round.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ian Pierce has no position in any shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline and HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »