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Younger Americans aren't investing in the stock market—researchers think this is why

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If you go about it carefully and follow the advice of the experts, investing in the stock market can pay off. A $1,000 investment in Apple 10 years ago, for example, would be worth more than $7,000 today. A $1,000 investment in Amazon would be worth more than $19,000. You don’t need to pick individual stocks, either. Putting your money in mutual funds or a 401(k) could even help you become a millionaire in as little as 18 years.

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But still, according to a new poll from Gallup, less than half of young Americans are putting their money in stocks. Researchers point to the 2008 market crash and the market’s latest volatility as the main reasons why.

“After the crash of 2008, when the Dow Jones fell more than 50 percent from the end of 2007 to mid-March 2009,” Gallup notes, “the ranks of those under 35 owning stock shrank steadily for the next several years.” Even “a decade after stockholders lost trillions of dollars, younger Americans are still leery of investing their money in stocks.”

Gallup Economy and Personal Finance Poll (Younger Americans Less Likely to Invest In Stocks )

According to the poll, 52 percent of adults under 35 say they owned stocks in the seven years leading up to the crash. By 2017 and 2018, only 37 percent did. By contrast, an average of 66 percent of Americans over 35 invested before the crash, and though the share is lower now it’s still at 61 percent.

The percentage of young adults owning stocks did reach a high of 43 percent between 2015 and 2016, but “the past two years have seen a drop as the market showed strong growth but considerable volatility — including some major declines this year,” reports Gallup.

The drop in stock ownership since the crash does not vary greatly by gender or education for young people, but there are some differences in income, with the greatest changes occurring among those with annual household incomes of between $30,000 and $75,000.

Gallup Economy and Personal Finance Poll (Stocks Rank Second as Best Long-Term Investment)

Many millennials are still hopeful, though. About a quarter of those between 18 and 34 ranked stocks and mutual funds as their No. 1 long-term investment option, higher than savings accounts, CDs, gold and bonds. Real estate ranked highest, with 32 percent of respondents ranking it as their top choice.

That’s a common misconception: Returns on the residential housing market are “not making anybody rich,” says certified financial planner Eric Roberge. “You’re barely keeping up with inflation, not to mention all of the costs that go along with owning a home.”

Astudy from London Business School and Credit Suisse finds that, after adjusting for inflation, housing offered returns around 1.3 percent per year from 1900 to 2011. The average annualized total return for the S&P 500 index over the past 90 years, meanwhile, is 9.8 percent.

If you’re thinking of investing, experts suggest keeping a level head even during times of market volatility. And while “there is not a one-size-fits-all answer” for handling the uncertainty, Greg McBride, chief financial analyst at consumer financial company Bankrate, tells CNBC Make It that a well-balanced and diverse portfolio can help mitigate risk.

Investing experts Warren Buffett, Mark Cuban and Tony Robbins suggest beginning with index funds, which hold every stock in an index, offer low turnover rates, attendant fees and tax bills, and fluctuate with the market to eliminate the risk of picking individual stocks.

And have patience: “The stock market is a long-term investment, it is not a get-rich-quick scheme,” McBride says. “You have to have the discipline to hang in there when markets get volatile. Over time, you are rewarded for that risk with high returns, but you [have to] hang on through thick and thin.”

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Don’t miss: If you’re investing while the stock market is volatile, avoid these 4 mistakes

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Why the world's wealthy are investing more in companies that care, Aecon's tumble and where Prem Watsa sees …

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A global investment club for the wealthy whose members aim to bring about social or environmental change as well as making a profit has grown by more than US$1-billion in two years, according to a report.

Toniic said its members now have a combined US$2.8-billion in what’s considered impact investments – capital placed with companies and organizations that can demonstrate they benefit society or the environment – up from US$1.65-billion in 2016.

Members, who include families and foundations as well as wealthy individuals, said the industry was becoming more mainstream.

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“Impact investing is not some minority sport by some hippies on the fringes,” James Perry, chief executive of the Panahpur charitable foundation, which has investments worth 4 million pounds (US$5.34-million).

Toniic found 82 per cent of members who participated in its study had portfolios that met or exceeded their financial expectations according to the report, released on Thursday.

A majority said impact investments yielded returns on a par with traditional investments.

Perry cited Auticon, a British IT consultancy that helps integrate employees with autism into workplaces, as a successful impact investment in the Panahpur portfolio. Auticon’s shares rose in value recently after it expanded into other countries.

“Clear dissatisfaction in the way the economy is going and emerging data around changing ecosystems have woken people up. People are seeing they can’t carry on like they are,” he told the Thomson Reuters Foundation.

The amount of money going into impact investing is rising by about 18 per cent a year, according to the Global Impact Investing Network, whose 2017 survey found the market was worth at least US$114-billion.

However Damian Payiatiakis, head of impact investing at Barclays, said the industry was still in its infancy.

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“The industry has progressed from the stage of visionary innovators and is now entering one of early adopters, but the majority of investors aren’t yet aware of or being offered this opportunity,” he said.

— Lee Mannion, Thomson Reuters Foundation

This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you, you can sign up for Globe Investor and all Globe newsletters here.

Stocks to ponder

CI Financial Corp. (CIX-T). The S&P/TSX Composite was more or less flat for the trading week ending with Thursday’s close, easing lower by 0.2 per cent, but the benchmark remains in overbought, technically vulnerable territory according to Relative Strength Index (RSI). The RSI level of 73 is just over the 70 sell signal and miles away from the oversold RSI buy signal of 30. There are four oversold, technically attractive index constituents trading below the RSI buy signal led by Aecon Group Inc. Dorel Industries Class B, CI Financial Corp. and Extendicare Inc. round out the list. Scott Barlow focuses on CI Financial as he was surprised that a company with its fortunes leveraged to market performance was not following the benchmark higher. (For subscribers).

Quebecor Inc. (QBR.B-T). This stock appears on the positive breakouts list with its share price closing at an all-time high on Thursday. Analysts have positive outlooks on the security with 14 buy recommendations. Earlier this month, the company announced a change to its dividend policy, which is expected to result in meaningful increases to its dividend over the next few years. Quebec-based Quebecor Inc. is a telecommunications and media holding company with an 81.5-per-cent interest in Quebecor Media Inc. Quebecor has three key business segments: telecommunications with its core asset, Videotron Ltd.; the media segment, with the television broadcaster, TVA Group; and its smallest segment, sports and entertainment. Jennifer Dowty reports (for subscribers).

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Aecon Group Inc. (ARE-T). Aecon Group Inc. didn’t work as a short-term takeover target. Perhaps the stock will look better as a long-term investment. The construction firm had seen its share price soar to a 10-year high of $20 in April, ahead of a proposed $1.5-billion takeover by the financing unit of China Communications Construction Co. Ltd. (CCCC), which is majority-owned by the Chinese government. But on Thursday, the shares tumbled to levels seen 4½ years ago, down 15.4 per cent for the day, after the Canadian government blocked the deal on Wednesday, citing national security. David Berman reports (for subscribers).

Watsa shuns China as Fairfax looks for investment in India, U.S.

The Rundown

Watsa shuns China as Fairfax looks for investment in India, U.S.

Prem Watsa, the billionaire head of Fairfax Financial Holdings Ltd., sees plenty of opportunities for investment in the U.S. and his native India. He’s less interested in the other Asian powerhouse. “In China, we are less invested,” Watsa said in an interview with BNN Bloomberg Television Friday. “We like democracy. We like business-friendly policies.” Watsa, who emigrated from India 46 years ago, is most excited about the opportunities being created there due to the policies implemented by Prime Minister Narendra Modi.

Top Links (for subscribers)

Economist predicts nasty Canadian recession in 2020

Others (for subscribers)

Friday’s analyst upgrades and downgrades

Friday’s Insider Report: Companies insiders are buying and selling

Friday’s small-cap stocks to watch

Others (for everyone)

Oil prices slump as OPEC and Russia consider output boost

Number Crunchers (for subscribers)

Nine U.S.-listed small-caps poised to outperform their large-cap rivals

Ask Globe Investor

Do you have a question for Globe Investor? Send it our way via this form. Questions and answers will be edited for length.

What’s up in the days ahead

Ian McGugan takes a look at rising U.S. interest rates and what that means to emerging markets and the rest of the world.

Click here to see the Globe Investor earnings and economic news calendar.

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Compiled by Gillian Livingston

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Feds investing $8.1M in Charlottetown Airport runway upgrades

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The federal government is investing $8.1 million for improvements to the Charlottetown Airport.

The project will focus on the airport's main runway and connecting taxiways, according to a government news release.

Major components of the work include grading and drainage improvements, replacement of stormwater collection infrastructure, and repaving.

The project is expected to create about 180 jobs during construction, the government said.

"Transportation systems are a vital part of the Prince Edward Island economy and the investment announced here today will foster long-term prosperity in all corners of the province," said Cardigan MP Lawrence MacAulay.

"These improvements at the Charlottetown Airport will give Islanders more transportation options while helping businesses get more products to market."

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Why Warren Buffett Takes His Investing Tips From a Baseball Legend

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2 min read


What do the stock market and baseball have in common? 

Entrepreneur Network partner Phil Town speaks about a famous quote from Ted Williams that Warren Buffett loves to quote, which involves not "swinging" at good "pitches." 

Williams always swung at the "fat pitches," which to him meant being choosy about which pitches to go for. Town distills this information as meaning even though a company is technically a good company, it may not be the right company for you.

Town notes that to successfully go after a "fat pitch," you must be willing to stand still with cash in your pocket. Simultaneously you should also be researching the companies you are intersted in. Research is integral to gaining a better understanding and thus be more educated to invest. And this sort of study is further aided by discipline and consistency.

Click play to hear more about baseball and investing.

Related: The One Thing Millennials Can Do to Live Life More Comfortably in the Future

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EN is partnered with hundreds of top YouTube channels in the business vertical. Watch video from our network partners on demand on RokuApple TV and the Entrepreneur App available on iOS and Android devices.

Click here to become a part of this growing video network.

Opinions expressed by Entrepreneur contributors are their own.

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