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Andrew Simon wishes he had been one of those lucky investors who bought Google at $100 back when the company first offered shares to the public in August 2004. The 23-year-old teller at Chase Bank in San Francisco watched with envy as the search engine’s share price rose to a peak of $715 by December 2007. Now, Simon is getting his chance to buy one of his favorite stocks on sale. Last October, after the Dow Jones dipped and the S&P sagged, he purchased a small stake in Google (GOOG) at $356 per share–almost half of what it traded for a year earlier. At the same time, Simon loaded up on Intel (INTC), buying 30 shares at $14. When the price dropped to $13 in December, he bought 70 more shares. “It was like shopping on Black Friday, but the prices were even better,â€ he says.
Simon started investing in early 2008 after watching the share prices of many solid companies fall in lock step with the rest of the market. Believing that those companies and their prospects are destined to rebound, he decided to devote half of his biweekly paycheck to investing. Over the last year, Simon has scooped up stocks such as China Mobile Ltd. (CHL), a mobile telecommunications company, and Korean steelmaker POSCO (PKX). At Simon’s time of purchase, both companies’ shares and price-to-earnings ratios had fallen considerably from their 2007 heights.
Simon isn’t unique. Erika Smith, a 25-year-old technology consultant for IBM, is also taking advantage of low prices. Smith started investing after her parents opened a Roth IRA account for her as a graduation gift and provided seed money to get her started. Now she has expanded her stock portfolio. In December, Smith purchased shares of General Electric (GE), Duke Energy (DUK), and Honeywell (HON). Her logic: “I’ve been trying to identify cheap energy stocks since that has been a major focus of the Obama administration,â€ explains Smith. “When his plan is kicked out, I’m sure I’ll see an increase in their value.â€
Even as older generations continue to grumble about how 2008 depleted their nest eggs, twenty-somethings–many starting to invest for the first time–are aggressively plunging into the market. What they’re finding are attractive valuations. For Simon and his peers, investing requires a sense of youthful optimism, a belief that the market and the U.S. economy will rise again. A new study commissioned by Scottrade showed that 54% of Gen Y investors have confidence in the market recovering and expect to see improvement by the end of 2009. Of course, it’s easy to have that kind of bright-eyed attitude if you won’t need retirement money for another 40 years or so.
Broadly, the trend is hard to quantify, but during 2008, nearly 200,000 investors age 30 and under opened new accounts with ShareBuilder, the investment arm of ING Direct. That represented an 81% increase over the number of new accounts opened by the group in 2007. TradeKing, an online stock trading and options trading broker, saw a 28% year-over-year increase in accounts opened by people under 30.
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