Market Dips May Create Opportunity for Generation Y


If there is a silver lining to the current economic situation for anyone, it may be college students.

Those looking to retire in the near future may be unhappy with the plummeting stock market, but for Generation Y this may be the time to take advantage of the lowered cost of stocks, even if they don’t have much to work with.

Tim Maurer, the Director of Financial Planning at the Financial Consulate in Hunt Valley, Md., says, “Most students don’t have a lot of money to invest, but if they do, I would suggest following the lead of the world's greatest investor. Warren Buffet is an aggressive buyer right now.”

While it may be a good time for some young people to get involved in the market, it would be unwise for them to invest beyond their means. “Where students should keep their money depends on how long it will be before they plan to use it,” says Stuart Ritter, a certified financial planner with T. Rowe Price. “Anything they're going to spend in two years or less should be in short-term investments, like money markets and savings accounts. Money they're saving for retirement, which is decades away, should be 100% in stocks. Intermediate goals, [like] buying a car, down payment on a house - should be somewhere between 0% in stocks and 100% stocks.”

The market’s current state should also be a warning sign. “Build up an emergency fund of three to six months of living expenses, make sure you have adequate insurance, pay down high-interest debt, and contribute to a retirement plan.”

Ritter does warn however that these focuses may not be the same for all people or in the same proportion. People lead different lives and their lives are constantly changing. Therefore, it is important for people to invest based on their own time horizon. “They shouldn't put less, or more, in stocks because the market has been down recently, just as they shouldn't put in more, or less, if the market has been up recently. How much they have in stocks should be based on their time horizon and they should regularly rebalance to their target.”

By focusing on personal finance and doing so in a responsible manner, college students create financial stability for their future. And, by creating stability for their future, students may also be able to help create stability in the economy as well. Maurer says, “While being young is not a good enough reason to buy, the age of college students will help smooth out the volatility that we're likely to continue seeing as we once again find normalcy."

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