Over the past two years, the number of investors aged 18 to 24 has doubled in Spain and now represent one in five retail portfolios. It is perhaps useful to understand this phenomenon that, according to the CIS, 74% of this group think they will live worse than their parents, … or that renting alone eats up 92% of your salary and buying a house means fourteen years of total savings. But is the stock market really an escape? Are they really saving for their future or are they risking what little money they have?
“There are more and more students enrolling in my subject,” he says. David Forcada, Economics professor and financial advisor for over 25 years. From his Instagram account, where he has more than 70,000 subscribers, he is personally experiencing this investment boom and explains to ABC that he has noticed in recent years how more and more young people are interested in investing due to the lack of prospects.
“Emancipation was significantly delayed and has been delayed so much in recent years that it is common to find young people in their twenties with stable incomes, but without large fixed expenses or clear short-term plans,” says Forcada. Added to this, investing today is easier than ever, with platforms and products accessible to everyone.
“There is a mantra that pensions are going to disappear and that inflation is eating away at everything, and that is where the interest of many in this world arises,” explains the expert. “More and more young people are looking for ways to grow their savings, even in small quantities and without much financial knowledge,” he concludes.
But how should a young person start investing?
Drawing on its experience, Forcada distinguishes three different profiles of young people who are starting to invest. The first is the one who allowed herself to be guided by the siren songs of the Internet, where a lot of information circulates but also a lot of misinformation. The second is the one looking to get into extreme risk products such as cryptocurrencies, CFDs or trading. And the third, the most sensible, is the one that rejects this speculative path and seeks a long-term strategy.
“This is the right way to do it, little by little, every month, without going crazy,” he explains. This is the well-known system of periodic contributions, what we call DCAwhich has become the gateway for an entire generation. To do this, index funds or ETFs that track major indexes have become the preferred vehicle for many due to their simplicity, lower costs and the ability to diversify without managing dozens of different assets.
“I always separate the core portfolio into three packages.” The first is the emergency fund, designed to deal with unforeseen events and with high liquidity. The second is that of fixed income securities, oriented towards shorter objectives over time. And the third is variable income, the block that looks at the long term and which, according to Forcada, requires something as simple as it is difficult: “It’s money that you practically have to forget about.”
When asked how a young person who lives with his parents and aspires to become independent should behave in practice, Forcada is clear. “If you live with your parents, your security fund is theirs and you can afford to bet more in the long term. “It is not unreasonable to rely heavily on variable income.” Of course, he cautions, “if you want to buy a house, it’s best to move it into fixed-income products a year or two before you pay the down payment, because you wouldn’t want there to be a correction right before you pay it.”
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