Young Investors, Don’t Let This Recession Dampen Your Spirits!
Investment | October 28, 2009 at 1:10 amThe psychological effect of recession is deep and long lasting. According to AFL-CIO Young Workers Report , today, the young generation, especially those in the age group of 20- 35 years of age were one of the worst hit by the recession. Many of them could not start off with independent lives because they did not have the resources to. Making business investments is something that they are apprehensive about owing to their shaky finances.
Even though the economic crisis might appear a temporary thing, it has deep-rooted impact on the psyche of the common man. In the past, during the Great Depression, people developed a habit of being thrifty and they continued that throughout their lives. Misers, you get a chance to pass off your hoarding nature under the guise of frugality learned during economic stress!
Experiences in the formative years are very important in shaping one’s attitude and those youth who’ve been a part of 
this depression are understandably a less confident lot. According to a study done by Paola Giuliano and Antonio Spilimbergo published in the National Bureau of Economic research, the youth who have faced tough economic times tend to depend more on luck than on their own abilities for success in life. They believe more on Government redistribution and are hesitant about making investments in public institutions. Interestingly, this result held true for only those who were between 17-25 years of age. Older people had already formed their strategies and the outside economic conditions did not have any effect on them. Younger people were unaffected as they were still under parental cover and had not started their independent financial establishments. Another study done by Berkley and Stefan Nagel of Standford University showed that only 13 % of the people who had suffered the Great Depression had invested in stock markets. This showed that the vast majority of them were so very prejudiced by their past experience that they did not want to take the risk of investing money in any venture that ran a fair chance of putting their money at stake. Instead those who had passed through better economic times had a better participation percentage in the stock market investments. Obviously, it’s understandable that when you burn your finger once, you are more cautious with your investment.
Its not only about great depression we are talking about folks, even lesser financial crises had a lot to teach people. People who suffered badly due to plummeting stock marketing values are seen to be less willing to stake their bucks once more. Young people who were a part of the 1980 depression in stock markets are now participating less in stock market investments. But older people who had seen the boom in 1960s and 1970s had taken the 1980s low as a passing phase and are participating more.
Statistically, the present recession should not scare us into non-participation in investment schemes, but biases formed due to our personal experiences, media information and experiences of friends shape our decisions. My advice to the young generation is- free yourself from all biases, think from an original perspective, take the help of a financial expert if necessary and make worthy investments.
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