This CEO says young investors trying to protect their cash is stopping them from getting rich — here’s why

Many young investors are keeping their cash out of the stock market, and one financial expert says that could be the “biggest mistake” they make.

Josh Brown, CEO of Ritholtz Wealth Management, argues that focusing too much on protecting themselves from losses can be counterintuitive to building wealth for the long term.

“When you’re young, worrying more about downside than upside is probably the biggest mistake,” he told CNBC in an interview published Oct. 10. (1) “You have to get rich before you focus on preserving your wealth.”

But in an economy clouded by inflation, tariffs and political uncertainty, even seasoned investors are asking: Where do I invest now?

According to a Bankrate poll, among Americans who did not prefer the stock market as an investment tool, roughly 29% of Gen Z (ages 18-28) and 24% of millennials (ages 29-44) said the stock market felt too intimidating — higher shares than any other generation. (2)

Some may be retreating into cash investments (e.g., CDs, savings accounts) or bonds, thinking they’re playing it safe, however, stocks have outperformed both over time. From 1957 to 2024, the S&P 500 has delivered an average annual return, including dividends, of 11.84%, compared to just 5.71% for 10-year Treasury Bonds, according to data compiled by New York University. (3)

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The largest advantage young people have in terms of investing is time. Even in the face of market volatility, young investors often have decades to let their earnings compound and recoup from any short-term losses.

“When you appreciate how much time you have, you recognize the benefit of long-term compounding,” Brown said.

Even so, some investors can’t shake the feeling that 2025 may be riskier than usual. Are there ways consumers can invest in the market while limiting risk?

Investing in the stock market inherently comes with risk, but there are different strategies for dealing with it.

One touted by experts is diversification. For young investors, this often means skipping individual stock picking in favour of low-cost index funds or exchange-traded funds (ETFs) that track the broader market. Doing so gives you exposure to a variety of sectors instead of a single company or industry. Essentially, you’re not putting all of your eggs in one basket.

Some ETFs also look beyond the U.S. stock market and invest in companies across the globe, adding further diversity.

Investors may also want to consider recession-resistant sectors — such as health care, consumer staples and utilities — which tend to hold up better when markets falter.

Being mindful of the type of account used to invest is also key, especially for new investors. For example, investing and contributing to tax-advantaged accounts like a 401(k) or IRA can lower your taxable income for that year, unlike investing with an ordinary brokerage account.

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CNBC (1); Bankrate (2); New York University (3)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.