Young Adults Should Consider an Aggressive Investment Strategy
Beginning a Savings Plan Early Allows Some Risk
One thing that young adult investors do all have in common is that they have the advantage of time. Whether investing to put children through college or to maintain a comfortable retirement lifestyle, young adult investors have the ability to be more aggressive than those nearing retirement and needing the use of their invested funds immediately or in the near future.
Most young adults should start building wealth with a concentration on remaining debt-free and incorporating an aggressive investment strategy into their budget planning.
Retain Some Diversification
An aggressive investment strategy should still maintain some level of security. One of the most aggressive distribution formulas is 80% of the portfolio in stocks, 15% in bonds, and 5% in alternative investments like gold or silver.
Keeping a small portion of bonds provides a bit of protection against the high stakes gamble inherent with high risk stock investments. While some experts predict an eminent burst of the technology stock bubble, many blue chip technology stocks still offer growth potential while providing a slight sense of security in their national reputations.
The Value of Aggressiveness
Besides technology-based investments, other stocks to consider include foreign stocks and upstart companies with high potential for growth.
The success stories of those willing to get in on the ground floor are well documented. McDonald's initial public offering was for $22.50 per share. After several stock splits, an initial purchase of 100 shares for $2,250 would now be worth several million dollars.
Failures get an equal share of press. I still remember the buzz over the incorporation of video store pioneer Blockbuster, Inc. back in 1989. The company, currently in bankruptcy, just finalized an agreement to sell its assets to Dish Network.
To reduce some of the potential risk, consider companies that have exhibited strong revenue history, have an experienced management team in place, and have solid cash flow.
Don't Overlook Hidden Values
In searching for investment vehicles, dig below the surface. Company reports for public corporations are available through the Securities and Exchange Commission . Some red flags that a company has hidden potential include undervalued real estate holdings or undervalued brand names. If you are considering technology stocks, investigate the company's investment in research and development. If the company is looking at new technology and advancement, it has far more likelihood of future growth than the company that is relying on an existing product line.
The Importance of the Time Factor
The reason time is such an important factor in an aggressive investment strategy is that those who will not need their money for 20 - 35 (or more) years can weather temporary downturns in the economy. An aggressive investment strategy works on a premise of high-risk and high rewards. Time allows rebounds and recuperation for those investments that, either temporarily or permanently, take a nosedive.
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Published by Martha Fry - Featured Contributor in Business & Finance
Martha Fry works as a freelance writer and editor. An accountant who worked at Peat, Marwick & Mitchell and Price Waterhouse, she also does financial consulting and often writes on business and personal fina... View profile
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10 Comments
Post a Commentgreat info, Martha, thanks!
I too wish I had followed such sage advice when I was younger. Great advice.
If you started investing 15 years ago in stocks at 80% of the portfolio, the gain was 0% over what you put in. Long term equities investment is a strategy of the past, not yielding as well as promised in this day and age.
I did this when I was younger. Good ideas!
Good advice, younger folks don't think about the importance of investing, cheers ;)
Excellent advice, wish I knew this much earlier!
God advice. The younger they get started investing, the better.
Great advice, thank you!
awesome writing:)
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