Generation Y Needs to Start 'Liking' Stocks—Now

Michael K. Farr, CNBC contributor and president of Farr Miller & Washington
Thursday, 4 Apr 2013 | 9:50 AM ET
Facebook Generation Needs To Start 'Liking' Stocks
Wednesday, 3 Apr 2013 | 2:30 PM ET
CNBC's Melissa Lee and Michael Farr, president of Farr, Miller & Washington, discuss why the Facebook Generation needs to start "liking" stocks now. Why young adults should begin an investment strategy for their future.

The financial outlook for the Facebook generation is full of promise but not without peril. People are living longer, more active lives, and Generation Y has 40 to 50 years until retirement.

Equities have provided higher returns historically and will continue to do so over the next decades. Investors with a longer time horizon shouldn't be concerned with day-to-day volatility and are the best prepared to benefit from positive long-term returns.

(Read More: Retire Before 40? Here's How You Can Do It)

It's important that this cohort of twenty-somethings invest early and often because there may not be a government safety net (Medicare and Social Security, for example) by the time they need it. This generation must learn self-reliance.

In general, I am comfortable with portfolios invested 100 percent in stocks until the client reaches about 40 years old. Between 40 and 60, it is generally appropriate to introduce fixed-income investments. But choices about how much fixed income and equity volatility a client should have depends on an individual circumstances and resources, and should be decided through in-depth conversations with the investor's financial adviser.

(Read More: Retirement Planning for Generation Y)

People in their 20s will never have a better money-making opportunity than now, but they must learn to pay their bills, save and then spend what's left. Not, pay bills, spend and save what's left. They must develop discipline.

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