Young adults should take advantage of investing today for their retirement, even though they are saving in a volatile market, according to one financial expert in a conversation with Yahoo Finance.
“Well, you know, you can afford the risk in order to earn the return that historically has been available from investing in the stock market,” said Sallie Krawcheck, CEO of Ellevest, a robo adviser geared towards women. “And so, therefore you should do it. The real key is starting early.”
Her advice comes when just under half of Americans were saving for retirement before the onset of coronavirus, according to real estate firm Clever Real Estate.
Krawcheck said to not focus on how much you need to invest, but just taking the initiative to begin. Young investors can start small and see their returns compound as they get older.
“Even if you don’t think you can invest very much, starting in your 20s, add 1% out of every paycheck, 2% out of every paycheck, 3% out of every paycheck,” Krawcheck said. “Whatever you do, because our human brain underestimates the power of compounding and the importance of starting early.”
She added that a dollar in your 20s is worth many multiples of every dollar you invest in your 30s, 40s, and 50s because that first dollar has more time to grow and compound.
Still, investing in today’s market may be confusing and a bit scary, especially for younger investors, Krawcheck said.
“What’s more interesting to me than the rally is the fact that we’ve got different markets telling us different things,” she said. “And so you’ve got these different messages, which says there’s still such great uncertainty and really a lack of, I don’t want to say discipline, but sort of a lack of a common understanding across different markets.”