Tips for young investors � stock market

Stock market � the advantages of staying informed

Even if is not the most media hyped issue off all time in Romania, specialists say that investing in stock market is very suitable for twentysomething investors.

Adi Lupsan, deputy director at Intercapital Invest, recommends this ‘pocket-money spending alternative’, especially now, when it is the best time to take advantage of the low stock prices.

“The stock market has its own cycle. After end-of-the-world type slumps, we see sky high appreciations. They are the most ‘entitled’ to gear up these opportunities and they can do it at a longer time horizon than other investors”, said Lupsan.

The biggest gain is, however the access to live information, apart from the potential material gains.

“How many young investors anticipated in spring 2008 the severe internal crisis we are going through right now? The stock market dropped the first hint in the second half of 2007, and for a young investor the access to this type of information “prepares” him for the future macro perspectives that can influence his life from all points of view, including professionally”, he explains.

Experience is the investor’s greatest asset, even if the financial resources are insignificant.

“Statistically, those who experience a stock market crisis become authentic veterans for the next stock cycles”, said the deputy director of Intercapital Invest.

Alexandru Cristescu, broker at Piraeus Securities said the opportunity of these investments tend to become more and more attractive and real, given the bottom level of Romanian stock market.

“It is not the time for all-time lows and there are big chances to see more of this bearish trend. This is why the investor should not see investing as fabulous earning drivers that could venture them into riskier stocks. They should see stock investments as long-term nest eggs”, said Cristescu.

Advices from specialists � have a bold, wise and patient approach

The key advice for young potential investors at BSE is, Adi Lupsan says, to have a bold approach on investing rather than focusing on the size of it.

He rewinds back to his first investment in the stock exchange arena, in the shares of Banca Agricola.

“At that time, the stocks were nearing to a dramatic downfall. But few months afterwards, the news shook up all the market: Raiffeisen Bank was planning on taking over the bank, which happened in the end, and thus I marked a significant gain”, he continued.

However, the amount of the initial investment was quite modest but slowly, and discretely, the investments grew stronger.

“The experience was now building brick-by-brick. Throughout the stock market adventure, we have good moments as well as bad moments. But we learn from our own mistakes and move on. At BSE, it’s very important to learn from your own mistakes, otherwise, you risk becoming a constant looser”, said the deputy director.

Alexandru Cristescu, broker at Piraeus Securities recommends prudence, patience and a selection of an experienced broker that won’t leave you broke.

“In times of stock market ‘prosperity’, any investment can return profit; most of the times without any solid reason, but in bearish times, like now, a broker’s know-how and insight can have a major contribution to an investor’s success,” said Cristescu.

Andrei Ciubotaru, broker at Vanguard, says it is very useful for young investor to have a material interest, in order to stay informed on the daily evolution of the business environment.

“The gained experience will prove to be very useful in each stage of your career”, says Ciubotaru.

Young investors have the highest risk appetite

Brokers polled by Wall-Street explained that young investors had the highest risk appetite, although their number was visibly lower, compared to other categories.

“At this age, you are willing to take higher risks, because the size of the investments is limited, and you will easily handle a loss. In time, investments at the stock market will grow stronger, and risk appetite will reduce slightly. On the other hand, the achieved experience throughout the time, reduces the risks, because, as any investor with years of stock market, young investors will easily anticipate which direction the market will take in the weeks ahead”, said Adi Lupsan.

The risk of investing in the stock market at 35-55 years, without any experience is much higher, because the newcomer would invest bigger amounts even since day one, and you build an experience on your own financial expenses.

High risk aversion of young investors will only venture them into risky stocks.

At this point, the percentage of young investors is relatively low, compared to other categories, probably because of the narrow financial education. Nevertheless, their behavior is different, even surprising, as Intercapital representative observes.