Should Young Investors Worry About Recession?

With headlines about a possible recession due to COVID-19 pandemic looming large, investors are a worried lot. They are concerned not only about their existing investments but also future plans which may go haywire. However, if you are a young investor, you shouldn’t worry about recession and continue with your investments.

Markets go through cycles, and a bearish phase generally follows a bull run. Recession is a short-term blip, which markets go through once in a while. However, age is the biggest advantage for you as a young investor.In other words, you have ample time at your disposal to overcome short-term losses and make meaningful gains in the long run. When you are young, your investments have enough time to bounce back from a recession and cover-up for the losses made.

As a young investor looking for prudent money management to enhance your riches in the long-term, recession brings loads of opportunities with it. Encashing them can help you make meaningful gains and add to your wealth.For instance, during recession when NAVs of mutual funds take a plunge, it allows you to buy more units at a lesser price. This averages out the cost of buying. Also, when the markets are down, as they are now, many quality stocks are available at attractive valuations. Buying and adding them to your portfolio can help your compound your wealth by several notches in the long run.When you invest in a falling market, compounding, which has a multiplier effect on wealth creation becomes even more powerful. This aids you in wealth accumulation for various goals, short and long-term.

As a young investor, instead of being worried due to recession, you must focus on your financial goals. See if you are on track of achieving them or not and the tweaks you need to make into your portfolio. Once you have earmarked a goal and have made a sound-investment for the same, stick to it irrespective of the market behaviour.If you panic and exit your investments because of recession hoping to return when the markets bounce back, there are chances of missing out on the rally. It’s not possible even for the most seasoned investor to time the market. Remember, time in the market is more important than timing the market. In conclusion As a young investor, staying invested during recession can help you reap rich dividends in the future. The most successful investors who started young have remained committed to their investments when the going has been tough. While money management can be a little tricky, sticking to your investments can help you compound your wealth in the long run.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.