The Fallacy of taking bigger risks when you are young

by Shoddy_Ad7511

I hear this all the time. Take bigger risks when you are young. When you are in your 20’s its fine to go heavy in high risk/high reward stocks. But this is flawed reasoning.

The truth is taking big risks when you are young is more risky because of opportunity costs. People always mention compounding interest over decades. But fail to apply this to investing in risky stocks when you are young.

Lets say you are 20 years old and you have $10k to invest. Its common to hear people say you can be more risky since you are so young. And even if you do YOLO and lose it all you can easily recover. But think opportunity cost. What did you really lose doing a YOLO?

$10,000

Invest in an index fund that returns 8.5% annualized return

Withdraw at 65 years old

That $10k becomes $400k. So you basically lost $400k because you YOLOed on a risky stock.

If you hold till 70 you lost $600k.

At age 90 you can give your children and grandchildren $3.2 million. Or you could have fun and lose it all on a risky stock.

Bottom line is a young persons greatest asset is TIME. Throwing investment time away by taking unnecessary risk is a massive mistake.

I’m not saying don’t buy stocks that are risky hyper growth companies. But also don’t gamble needlessly. Because you are gambling much more than that couple hundred or thousand you see next to the stock ticker.