Sunday, February 20, 2011

The youth and the stock market

Quite a lot of people are joining the stock market at a younger and younger age. While it's important to know about such things eventually, I wonder about the wisdom of joining it at such an early age. Isn't there something else to focus on, like socializing and indulging in pointless but memorable pursuits? I started doing this stock thingy when I'm 26 or 27. I've the bulk of my earlier years doing plenty of pointless but memorable stuff. I remembered playing lots of RPG games, reading extensively on all sorts of topics (except finance) and simply just day dreaming.

Would I exchange all these stuff for an earlier retirement? I doubt so. It's just part of growing up, I suppose. I fear that the younger the youths are joining such financial pursuits, the faster they would lose their youthfulness and idealism. The financial arena is not for idealistic individuals because they would be washed out in no time. Will today's youths be losing their idealism at an earlier age too? Who else could be idealistic if not for the youths?

The youth are greatly limited by the lack of capital. I don't know about them, but when I'm in my early twenties, even if I've the interest in the stock market, I would perhaps have less than 10k in my bank account. And what could I possibly do with 10k in my bank account? Buy s-shares? Buy those pennies and hope that my skills in picking out a gem would ensure that my 10k would multiply? It's not impossible, it's just terribly hard and the odds are against you since without the necessary capital, every shot counts even more so and the tolerance of mistakes are significantly reduced. Or perhaps driven by the lack of buying power, one would be driven to use leverage to enhance the gains (and the losses)?

I think like a kitten, the youth should spend time on playing.

So, what's the point of dabbling in the stock market when one is so severely limited? I believe that without a minimum capital, it is better not to start investing/trading. That minimum should be around the range of 50k. Why 50k? With that amount, a position of 10k can be placed each time, so one would have 5 bullets in total. With 10k, one can buy most of the blue chips, which are a lot safer than pennies, though the gains are not as substantial. With 5 bullets, perhaps 3 would be average, 1 would be spectacular in profits and 1 would be in the loss, so one would come out of it alright. But what happens if you don't have 50k to begin with? Then stop kidding yourself that the positions are for long term investment and stop deluding yourself that the amount of dividends would contribute towards your passive income for attainment of financial freedom. Even if you struck gold, the amount gained would be insignificant.

A lot of youths start to believe in their own investing/trading powers after reading up on a few books by their gurus. That is the problem isn't it? Clouded by youthful optimism and confidence, they march straight into the jaws of a shark, still thinking that they can escape unharmed. I think it takes life experience to sieve out skills from luck, because a skilled person would have the same outcome as a lucky person. It also takes life experience to sieve out the market truths and the myths. Literature cited time in the market is better than timing the market. I'll say it depends on which stock you're holding. The wisdom it takes to determine when an advice is appropriate to a situation will take time to develop. I'm just not sure whether when I'm in my twenties, I would want to learn about such things. I feel that a part of something in me would be lost and gone forever. You can get all cynical and skeptical after being 'tainted' by the market, especially if you've lost a lot of money.

Seriously, I would recommend most youths to simply concentrate on their studies or get a part time job and in the meantime, just read extensively about finances in general and not to focus so much attention on the stock market. There is a time to do everything and once that time has passed, you'll be wondering how your youthhood is like. Would it be full of adventure and memories or would it be that you've made a ROC of 10% but an absolute amount of $1000? What is $1000 to a youth with no proper earning power yet and what is $1000 to a working adult?


Musicwhiz said...

I agree. Time is always the best teacher. But I do not blame the young ones (20-29) for their exuberance or optimism, as you can really feel invincible when you first start out and make a lot of (paper) money as the stock market keeps climbing (as it has been for the last 1.5 years).

The reality is that you probably have to survive at least one full bull/bear cycle in order to learn effectively about what constitutes proper investing and what is merely speculation. And this is in addition to you documenting and avoiding all your mistakes, having a proper mindset/philosophy and harbouring the right mental framework and temperament. So, conclusion is - not easy.

As LP said, better use your youthful adult years to engage in some silly but good-to-remember pursuits. For me, I was watching rock concerts and keeping track of music up till I was 27/28, and just going out to watch movies and cycling around Singapore. There is a right time and instance for focusing on wealth preservation and accumulation, and if one starts too young, there is a risk of becoming too materialistic and "money-minded".

la papillion said...

Hi mw,

Haha, fully agree :) I, for one, would not lament that I didn't start off in the market earlier. There's a time for everything, indeed :)

Createwealth8888 said...

BTW, stock market always love new investors or traders for redistributing their saving to the veterans and the pros

Anonymous said...


In life there are always exceptions.
People who are genuinely interested in doing business from very young are usually in the share markets from very young too.
Examples: WB,our own Singapore's Gabriel Yap, etc.

I am very interested in doing business too; But don't have the "guts" to really start one. But I monitor the SGX. EX. from Slater Walker's time, when Haw PAR was at > $32/share. Of course OCBC was at > $50/share and the rest just folowed relatively. When LKY said "something" at that time, the market bubbles just bursted.
I keep on monitoring the SGX Market and read as many investment books, articles, anything to do with money from (25-40) years old. I still do.

Then at the age of 40 I think I have found my suitable "investment principles" and even then it was hazy I plunged into the deep water of the SGX Market not a gentle dive in the more shallow pool.
But I sticked to my "investment principles" though along the journey until now I have sidetracked and have made a lot of investment mistakes(lost a lot of money).
I believe I survive and prosper until now because I enter the market at the "ripe old age" of 40.And most important I am genuinely interested in investing. I think I will carry on until I am too old to think.

The Moral of Investment:

The market is always there for those who are geniunely interested no matter what's your age, you should do well. It's not really for the money alone. It's more like your "hobby for life".
Ha! Ha!

Anonymous said...

Hi CW8888,

"BTW, stock market always love new investors or traders for redistributing their saving to the veterans and the pros."

Don't forget we all must be new investors or traders before becoming the "old fox" like you now.
Another words there is no free lunch, everyone must pay tuition fees before qualify to be an "old fox".
Ha! Ha!

Kyith said...

good sunday to all,

i believe i was very interested in stock market for a long time since 2003 till 2008 but really the most that i learn was the crash of 2007 where everything just went out of the window. all those ideals and theories just give way to market psychology and market cycles.


Anonymous said...

hi, totally disagree.

like any other field or sports, the younger you start, the better your position will be. but ofcos not all ppl start young will succeed.


Anonymous said...

oh and the younger you start, the less money you are going to pay for the mistake you definately going to make.

so temperament, can share your "investment principles", sound good to me.


Anonymous said...

Hi coconut,

The Moral of Investment:

"The market is always there for those who are geniunely interested no matter what's your age, you should do well. It's not really for the money alone. It's more like your "hobby for life".
Ha! Ha!

On the other hand,
I disagree that the stock market investing is comparable to taking up a sports. It's really more dangerous and serious.

"so temperament, can share your "investment principles", sound good to me."

Anonymous said...
International investor John Templeton only invest in the country when there is "blood in the streets".
I have read this somewhere.
I try very hard to follow this principle from 1988 till now. The first time my "ding dong' almost dropped. But I had managed to survive. So subsequently, I am getting "bolder & bolder" but my "ding dong" still shakes in each bear market investment. Remember I try to invest only in a bear market.
But I am an ordinary fellow so I only invest in SGX. No international markets for me.
SGX is already too complicated for me.
Since I am here writing this, it works for me.
Thank God for His Blessings even though I have made many foolish investing mistakes.


21 September 2010 22:54:00 GMT+08:00
Createwealth8888 said...
Lawrence, I am like you too. I have made plenty of foolish mistakes in the Big 2008 Bear but manage to survive and still making money since then and only from the SG stock market too.


22 September 2010 07:27:00 GMT+08:00
Anonymous said...
Yes, Creatwealth8888, I am happy for you too. Keep it up.
To me, I call this Bear/Bull cycle investing. And yes no one can time the market. No one can know when the Bear/bull will appear. But when a Bear/Bull has occurred, it is there and everyone can see it. So be brave when a bear market has come.
Nevertheless,during this latest bear market investment, at one point my portfolio was down 40+ %. So I thought die already. I am prepare to wait 4 to 5 year for my portfolio to turn around. But thank God it only takes 2 to 3 years. Not only it turns around, my portfolio shows a profit of about 17 % despite the very foolish investment mistake of losing a quite high five figure sum.
To tell the truth, even though I practise bear market investing, I found that I always average-down buying too early. I still have to learn to use buying average-up technique to avoid catching the "proverbial falling knife in a bear market.
And needless to say I always sell to early.
In fact I have sold about 20 % of my current portfolio already. Why? It's because I like to have more "bullets" in case a "Black Swan" or "Baby Bear" appears
And thank you for allowing me to post in your blog.


22 September 2010 22:06:00 GMT+08:00

But everyone must find his own ways in the market that suits him.
I have sold about 30 % of my portfolio and still waitng to sell more.

AK71 said...

Hi LP,

I think it is courtesy that I leave a comment because your blog post made Evo ask me a question in the cbox which led me to blogging my own thoughts on the subject. Haha. The power of social media. Sigh. I am a late bloomer. ;p

This is taken directly from my blog post:
"Sound ideas in personal finance and investment, I believe, should be taught to children as soon as they are able to understand them. Teaching them the importance of thrift and savings is but the first step. How to make their savings work harder? Now, that's a big second step."

Congratulations on a successful blog post. :)

Ken said...


Nice article. :)

But the point is, youths seem to be flushed with cash, maybe the account is under their parents name and the parents set aside the funds for them. In a way, it is useful for the younger people to understand about market mechanisms and the notion of buying assets to "make money work harder for you".

On the other hand, being young, the youths may not control their emotions. Like what you mentioned, they could feel over the top upon a few trades and claim to be smart. Well, we see this often, don't we?

To my opinion, I think it is a good training ground for the youths to develop financial maturity and emotion. And not get too driven with fast money in, fast money out.

Great insights and I guess it should been published in some public domain.

Cheers :)

Ken Tan - cookieguy

Ken said...

One more thing...I remember I enjoyed life a lot when I was a youth. Hahaha...

Enjoy life as in doing a lot of sports and outdoor activities such as ping pong, soccer, badminton, basketball, snorkeling...anything that I find interesting. It helps in my personal development, social and communication abilities.

Since when I talk about stock market. Looking back, my life as a youth is nostalgic.

Today youth seems to be very focused on wealth creation. Perhaps, it's due to peer comparison and reference leaders. It's not wrong, in fact I think it's a good learning curve - read books, trial/mock platform, investment clubs in schools etc.

But I hope they do not get too overly driven and forget about the wonderful things on being a youth. The chance where you could explore, see things and take on the memories as part of a beautiful life journey.

Thanks once again for the article.

Ken Tan - cookieguy

iisterry said...

I am really amazed that you have taken such a narrow-minded view towards this observation.

1) Irrational exuberance and overconfidence from short term winnings are not limited to only the youth but countless middle-aged professionals as well as heartland uncles & aunties.

2) From a financial viewpoint, the young would be able to handle a setback much better than the elders simply due to the available time ahead of them.

3) I think most are familiar with the age old saying of "The journey of a thousand miles begin with a single small step." Belittling the amount of capital that they begin with shows that some degree of contempt has crept into the minds of those who perceives themselves as as on a higher intellectual/financial stand. 50k might be significant to others, negligible to the millionaire and insignificant to the billionaire.

4)Here I am, reading on another site of someone's niece receiving their first dividends and here we have a post asking them to party instead. Your words seem to imply that youths should simply fritter their time away and join the ranks of the Japanese/American Freeters.

5) I believe the correct intent should be to remind would-be investors not to mistake luck for skill as a rising tide lifts all boats. This is applicable to every single person regardless of age/experience. Financial literacy and responsibility should be practised and taught at the earliest age available.


Anonymous said...

well said YMMV.

yes, the young would be able to handle a setback much better than the elders, absolutely agree, and their mind are much flexible than most of us here.

thanks for your comment temperament but trading/investing is more dangerous than sports? i know sports can kill but not trading (unless you take your own life).


Anonymous said...

Hi coconut,

Exactly, I came to know my sister-in-law's broker had committed suicide. And her husband had to pay for her about 100k+ trading debt. This was in the 1970s. 100k+ was a lot of money then. And many other relatives who were very rich but due to trading in stock market had broken up their families. Some had absconded from Singapore.
It's no joke young man, don't take it like "Tikam, Tikam". Once you are hooked on trading, you most probably won't get off so easily.

la papillion said...

Hi all,

I'm sure surprised to see so many comments when I came back home. Thanks for your contribution and for sharing your views :)

To bro8888,

Ya, that's true. Without a batch of newbies to push the market up, the oldies can't make profit, haha!

To temperament,

"Seriously, I would recommend most youths to simply concentrate on their studies or get a part time job and in the meantime, just read extensively about finances in general and not to focus so much attention on the stock market."

That's why I mentioned 'most'. I understand that there are exceptions. If someone is interested in it, who am I to stop him/her, haha :)

Hi Drizzt,

Market crash is indeed something to experience in one's investing/trading lifetime. I think it helps to have a few market crashes experience tucked under your belt :)

la papillion said...

Hi coconut,

I'm not arguing whether a early start would produce better investment results or not. I'm not arguing whether mistakes made early are going to make a contribution to future success or not. I'm simply arguing whether it is wise to do so at a young age and what's the cost of doing so? What's the thing you lose when you're too engrossed in stock market at such a young age?

That's the gist of my article.

Hi AK,

Hmm, I saw it in the cbox :) Thanks for dropping by to give your views. I guess you also disagree with my post? haha :)

Hi Ken,

Thanks for your comments. I think it's true that more young pple are focused on wealth creation. Perhaps it's the books that they have read and the constant exposure to the language involved in all things financial. Good and bad, I think.

Hi iisterry,

I'm also surprised that taking a view point is considered narrow-minded. Since when did disagreement become the symptom of narrow mindedness?

1) Yes, I agree with you. It happens to everyone who are relatively new in the market, regardless of their age.

2) Disagree. Being young is not an excuse to be sloppy with money management. We've often seen newspaper of very young pple who had lost their parent's retirement fund because they had though they are young and are able to take higher risk.

3) I agree that everything has to begin on a small step. I begin with lesser than 50k, and I dabbled in warrants and pennies because it's cheap. I'm simply sharing my mistakes and what I had learned from them if I can turn back the time. I'm also sharing about the disadvantages of having a low capital. Do you disagree with my point about having not enough capital? Would you advise someone with say 10k to begin investing/trading?

4) I did not ask them to party. I ask the youths to indulge in pointless activities that would contribute to a memorable youth. I shudder at the thought of someone whose youth is occupied by time spent on trading/researching on companies. There will be a suitable time for such thing but the time to do pointless but memorable stuff would be gone by the time you start working.

4) I agree with you. There's more to financial literacy than just the stock market. I am all for learning about financial literacy. I vehemently disagree that youths should spend a lot of time in the stock market, however.

Anonymous said...

i think there are big different between our view on trading and investing and of the market place.

anyway good post (thats why there are lots of comments).


mark said...

The common problem I find in myself and seemingly common in many too, is that when one first begins working, we are just not used to earning an income. we are not used to seeing the amount in the bank grow. process all that and the end result is to spend it. Worse still, when the time comes from credit card.

I agree we need that pile of bullets. Perhaps if someone really taught me the value of the dollar when i was a kid, it might have been a lot different. Its hard (but not impossible) to teach an old dog like me new tricks but I do try my best still. I believe i do make progress by resisting the wants against satisfying the need.

There has to be a reason to set aside money. Everyone has heard of the notion of investing but few truly understands what it entails. I see my younger peers save, but for things like holidays and stuff. Well it is better than going into debt, but they do need someone to guide them towards a longer term goal. The common sentiment out there? "I will start saving for investment when I begin earning more'. Chicken an egg thing. Without a plan, it doesnt matter if one earns 5k or 10k cuz what the brain hears is 'I will save when i earn more next time'. That next time may never come. It has got to start somewhere. Hence, why not now?

Chong Jun said...

Hi LP,

Although I'm probably one of the youth that is being mentioned in the article(since i'm only 23 here), I have to some sort of agree that those who initially started off in the market, are usually blinded by the thoughts of getting rich. I'm of course, of no exceptional. I have to be frank that when i started 2.5 years ago, I was thinking of how the market could replicate my money and how my dreams of being rich could be achieved through the market.

However, as time goes by and now my 3rd year in the market, I realised that it's not what I think it is. You have mentioned that one needed at least 50k. I wouldn't argue if a 28/29 years old would have that kind of money too but at an age of 20/21, 10k of capital is certainly insufficient. I know this fact hard and cold simply because I initially started off with a low 5 digit account.

I think its always good to have a dream and one can always learn on the journey while growing up be it investing in the market or gang fight on the streets.

Today, I'm glad that I have spent quite a bit of my time for the past 2.5 years, learning to trade/invest and reading on companies instead of playing games, which i used to do most of the time. To some, late teens and early 20s is about having fun, playing games, spending time with girlfriend, hanging out with friends. For me, I'm only putting in "stock market" into the equation without taking out anyone of them.

The market or the knowledge of companies allows me to converse at a higher frequency with my dad and I'm sure my dad would be more than happy to know this than hearing me telling him how I beat my opponents in games like DOTA or COH? lol.

Nevertheless, I must say the road to riches is never easy, usually cold and lonely.

JW said...

To me, the base start capital is very important.

A 100% returns on $1000 may look big on percentage terms vs a 10% returns on $100k, but to me, what is more important is
1) Amount of absolute returns
2) Sustainability
3) Amount of time spent in analysing

After spending so much time in the market and reading up different books, it is now my opinion that the best investments is never in paper assets, although it is the easiest to get in.

Createwealth8888 said...

The BEST investment is to start your own biz and second best is to bet on other people's biz (stocks).

Few can make it on the BEST but many can try their hands on the second best and get resonable success that is good enough to complement their day jobs.

iisterry said...


I think some readers are unsure of the meaning of "YMMV". It is not a signature, it is an acronym standing for "Your Mileage May Very" meaning "Your Opinion Might Be Different".

That said, I believe the amount of controversy which has been stirred up certainly shows a lot of differing opinions with your view.

Your viewpoint of both sides border on the extreme. Investing with the purpose of gaining financial literacy is not socially exclusive. It does not mean that you cannot have a memorable childhood and be financially responsible at the same time. To think otherwise would be "narrow-minded".

The 2nd point I would like to bring up is investing isn't just about financial rewards. There are tangibles & intangibles. Even if a kid begins out with 10k, the lessons and habits that are derived at a young age are priceless down the road.

First they learn about managing their expenses, keeping aside a certain sum, then they learn how to grow that nest egg comfortably.

Amounts are relative. If a pauper only has 1k in his account and manages to garner a 100% profit/1k. It is still a significant sum to him although it is worth less than a peanut to others.


Jeremy said...

Hi LP,
My thoughts on the matter of investing at early ages.

1. I think it is better to start investing as early as possible no matter what amount of start-up capital one has as long as the amount is enough to buy shares of a good company (so $10k to me is enough to start some investments already). This is to allow compound interest to start working as early as possible on one's investments. It is ok to split a small capital sum of $10k into not more than 3 strong blue-chip counters, even if it means owning 1 lot for each of the two or three blue-chip counters. Dividends (through a small sum) will start to kick in and the person can hold the dividends and with some more savings to continue investing in future upon good opportunities.

2. However, whatever what age a person starts investing, before investing he or she must have learnt extensive sound investing principles through own reading of books, online articles, attending suitable courses/ seminars and preferably having an experienced mentor in investing as a guide. It is not the age that matters, but the maturity level of thought when it comes to investing and money management. Youths and older uncles and aunties all can fall prey to greed and fear when it comes to investing, so it is the individual's personal maturity level that matters (having discipline, critical thinking and hardwork in mangaing one's investments).

3. There is no age when one is absolutely ready for investing as the best investor is one who humbly and constantly learns from his/her every mistakes and from other people.

Regarding being too caught up with investing stuff and chances of being materialistic when investing at early age thus losing other things one should experience when young, it all depends on how one sees investing, whether one knows how much is enough in order not to get too caught up with it. I know of some older folks apart from younger ones who also can get very caught up with investing that they spend many hours every day on following financial news from papers or other sources and checking their stock quotes on internet or television.

This raises the question whether investing is necessarily done this way by spending many hours every day.

My two cents worth. Just sharing my personal thoughts on the matter.


Createwealth8888 said...

Does your improvement of investing skills more likely to come from

1) spending X units of time in the stock market


2) completing X number of stock transactions (turnovers)

1 or 2??

Anonymous said...

Hi CW8888,

For me basic theory "skill" must be acquired by spending X units of time in the market. And should continue to explore for new theories non stop.

The real practical skill is acquired by completing the X number of transactions in the market, provided you really able to spot where you can improve.
So far I think I have improved only a little.
My short term trading always "koyak" as I have shared before. I have lost a lot of money.
So much so I think I am not suitable for short term trading.
Long-term trading is O. K. lah.
Ha! Ha!

Anonymous said...

haha no end in sight.

the natural world learn their surviving skill when they are young or born. we learn most of our financial survival skill when we are adult, thats way too late! that is also why it is soo difficult to make money in this game.


Cheng said...

Wahhh so many comments, I also wana join the crowd. :D

It's an honor to be mentioned in the blog post since I'm also in this category haha...

Overall, I've enjoyed this journey, became wiser with worldly wisdom, gained valuable experience with little money to lose and made very good friends. :D

ps: I use it to charm girls too haha! (I know you are thinking along this line, but not with money)I tell funny jokes about the people and stock market. Some ideas borrowed from LP. :P


bQ said...

"Clouded by youthful optimism and confidence, they march straight into the jaws of a shark, still thinking that they can escape unharmed."

1. Not all youths are like that. That's a sweeping statement.

2. 10k might be a small sum, but since everything is relative, losing 5k out of a 10k investing capital is as painful to someone who loses 50k out of a 100k capital.

3. So, my point is, its better to lose 50% when you are still young and poor, and experience the pain at that age, so you will exercise better financial management later on in life when you've got more money to invest. Human being human, we only stop being greedy after getting our hands burnt. Its not a matter of age. Better to get burnt when young.

4. For me, investing actually helped me experience life more. I profited, and used the profit to take up new activities like flying (as in, learn how to fly an aeroplane). If i hadn't profited, i really wouldnt consider spending half my savings on such expensive stuff.

5. Its all about striking a balance. I used the earnings to enhance my life experiences as a youth.

6. Turning 22 this year. Earned and saved up my capital on my own. Indeed, i started off being overly optimistic, but like i said, i am just glad that i got burnt earlier on.

Just my two cents... =D

Chong Jun said...

Wa master Cheng! You must share your jokes so we can use it to Xian girls too! Haha!

Grey said...

Dropping in just to say:


I said...

Hi LP.

I'd like to put my 2cents in :P

-Most amateurs regardless of age do fall into the hands of greed at first, no? So starting out when we're young, we get burnt first and learn the lesson with minimal damage (In the broader scheme of things), as compared to aunties and uncles who have much higher purchasing power and get burnt alot more. Like ($XXX vs $XX,XXX or more).

-I find it very interesting on it's own!