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Forget cash! Young investors can get rich and retire early by investing in cheap FTSE 100 shares

Buying FTSE 100 shares is a much better way of building your long-term wealth than leaving your money in cash. The Motley Fool has been arguing this for years, and younger investors are starting to get the message.

New research shows they are hungry to buy shares in the stock market crash, to take advantage of today’s bargain valuations. More than a quarter say the coronavirus meltdown has actually made them more likely to buy shares over the next year, new research from personal finance comparison site shows.

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Some may be surprised by that, but they shouldn’t. At the Fool, we have always advocated buying stocks when share prices fall. That allows you to buy top FTSE 100 companies at reduced valuations. Who doesn’t like a bargain?

How to get rich and retire early

Finder’s research shows that Generation Z and millennials are now 66% more likely to invest than baby boomers. Many have given up on cash altogether, disillusioned by today’s dismal savings rates.

I can understand that, given that you would be lucky to get more than 1% a year from a best buy easy access account. That is no way to build your money for the long term. 

Returns on cash are likely to slide further, as the Bank of England considers negative interest rates. Imagine what that will do to savings.

Of course, investing in the FTSE 100 has risks. The market has been hugely volatile this year. That is likely to continue, even after we ease our way out of the Covid-19 lockdown. GDP will fall sharply. Millions will lose their jobs.

Stock markets have been through downturns before. History shows that they always recover in the end. People who buy shares when they are cheap, make fat profits when they bounce back. It seems like the younger generation have studied history. In total, three quarters intend to invest at some point. Good luck to them.

Cheap FTSE 100 shares are everywhere

Younger people are also more tech savvy, and will invest using dedicated apps. They are attracted by the low fees, and this is wise. When buying FTSE 100 shares, it pays to keep your trading costs down. That way you get to keep more of the growth and income to yourself.

I would also recommend investing free of tax, using your Stocks and Shares ISA allowance.

Charlie Barton, banking and investment specialist at Finder, said younger generations have a bigger appetite for risk, and rightly so. “They have their whole lives to ride out market turbulence, so are more inclined to view the current market lows as an opportunity, despite the real possibility of their investments losing value.”

I couldn’t have put that better. Young investors in particular have nothing to fear from this market. If they buy FTSE 100 shares while they are cheap, they have a much better chance of getting rich and retiring early.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.