New investors are seizing a 'generational opportunity': Here's how they're thinking about the market


In a span of months, the U.S. stock market experienced moves that might occur over the course of years. And some young people have taken notice.

Millennials reported that they invested more money in the market in April than they did in March, and more often, according to a recent survey of more than 1,100 of Investopedia readers. And these young investors are generally more bullish, or optimistic, about investing than their older counterparts, the survey found. "They may see a generational opportunity to buy stocks at a discount," Caleb Silver, Investopedia's editor in chief, wrote.

It's not the only indication that investors are looking to profit off the market's recent turbulence. Online brokers saw new accounts grow as much as 170% in the first quarter, CNBC found.

These new accounts may represent "new investors who sense a generational-buying moment but do not have much background in the equity space," Citi chief U.S. equity strategist Tobias Levkovich said in a note to clients. "We have heard anecdotally about younger individuals with less market experience viewing the March plunge as a unique time to start portfolios." 

Michael Armesto, 27, is among that new cohort of investors, while 18-year-old Sophia Kianni says she's been tempted to join in after hearing success stories from her friends. Here's how they're learning about, and thinking about, investing, and the smartest ways to get started in the market, according to a financial planner.

'I was waiting for the right time'

As the U.S. stock market tumbled about 34% between February and March, Armesto seized the opportunity to open a taxable investment account in March. "It is something I've been thinking about for a long time," he says. 

"I did wait for that dip and, when I saw it, it seemed like a good time to invest," says Armesto, who lives in Washington, D.C., and works as a statistical programmer. While he knew his money could earn a higher return in the market rather than sitting in his savings account, Armesto says that investing is "kind of scary and intimidating," especially for someone like him with no formal education on related topics.

A majority of his knowledge has been acquired from "a good amount of Googling," Armesto says.

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When he finally started investing on his own, he stuck with an approach that experts like famed investor Warren Buffett recommend: buying mostly index funds and only investing money he won't need for the foreseeable future.

"I was waiting for the right time, even though I know time in the market beats timing the market," Armesto says. While he has no immediate plans for the money he's invested, he says down the road it may help him to buy a home. In recent months, he also increased his 401(k) contributions, and plans to continue adding money to this brokerage account throughout the remainder of the year.

I was waiting for the right time, even though I know time in the market beats timing the market.
Michael Armesto
New investor

'I've seen some of my friends have turned a huge profit'

Investing is a topic that high school senior Kianni discusses regularly with friends. "It's something that a lot of people at my high school talk about getting into, especially as we're getting jobs," she says of her school in Alexandria, Virginia. 

When in-person classes were still in session, Kianni recalls seeing one of her classmates sometimes checking how the market was doing on an app on his phone. And in recent months, several TikTok videos have circulated among her friend group that emphasize why it's important to start investing at a young age.

If she were to start investing, Kianni says she'd start small and put her money in mutual funds or exchange-traded funds (ETFs), which she learned are typically safer than individual stocks. For now, however, Kianni has yet to take the plunge.  Instead, she's focused on saving money she's earned, from paid speaking engagements about climate activism and refereeing volleyball matches on weekends. And given her involvement in climate activism, she'd want to make sure her investments aligned with her values.

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"I've definitely been tempted because I've seen some of my friends have turned a huge profit," Kianni says.

Still, her father discouraged her from trying to profit off of other peoples' suffering and to focus on saving instead. "It has been pretty enticing, but I understand what my dad is saying, and I do think it's better to be smart and I'd rather keep my money than risk losing it," she says.

'Everybody has to have a reason to invest for the first time'

Whether it's the recent market turbulence or something else, it's good that young people are motivated to start investing and growing their wealth, according to Glen D. Smith, a certified financial planner and managing partner of Glen D. Smith and Associates. And starting earlier helps people to avoid the top investing regret, which is not starting soon enough.

"Everybody has to have a reason to invest for the first time, and in 30 years it's not going to matter what that reason was," Smith says. That's because investing should be a long-term play and not a way to expect to "get rich quick," he adds.

I'd rather keep my money than risk losing it.
Sophia Kianni
High school senior

The approaches that both Armesto and Kianni are taking align with much of Smith's advice. He urges new investors to "stay clear of individual stocks" and instead opt for low-cost funds that track broad market benchmarks like the S&P 500, which is a quick way to achieve diversification in your portfolio. "Just stick with boring equity ETFs."

Simplicity and consistency are key components on any checklist for beginner investors. While many investors may have entered the market thanks to the downturn, Smith encourages them to stick with some other basics: Reinvest dividends to buy more shares and easily expand your holdings over time, open a Roth IRA to grow your wealth tax-free, and employ a strategy known as dollar-cost averaging, which means buying assets at set intervals.

By regularly adding money to your portfolio — Smith recommends doing so with each paycheck — you'll help to smooth out the amount you pay for investments and benefit from compound interest. Even if you do invest a lump-sum amount initially, slowly adding more money over time will ensure you're invested no matter whether the market skyrockets from current levels, meanders, or goes on to test its March lows, Smith adds.

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In addition to investing money that you don't need to tap anytime soon, Smith says it's important that investors temper their expectations. That's because market returns may not be as robust in the next 10 years as they were in the last decade

Finally, keeping that long-term focus is important on a day-to-day basis, so as not to be tempted to try to make changes. "Don't even look at the account more than one time a month," Smith says. And staying invested through the ups and downs is important, since research shows that a bulk of the market's gains in any given year occur in the span of a handful of days, he adds.

"If you try to get cute and try to time the market, know that the smartest people in the world can't even do that," Smith says.

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