If young people spent less time looking at real estate prices and more time playing the stock market, they could be better off.

You were old enough to pay attention to what happened to the stock market. And what you saw was an inferno consuming people’s life savings.

Whether you realised it or not — you were learning a very strong lesson. That share markets are things that crash. That they are dangerous and that sticking money in the bank is far safer. We see these lessons in how investors behave.

A recent UBS survey found millennials are far more likely than any other age group to think buying and holding stocks is a bad idea. And when we look at the fraction of their money under 35s keep in shares, it is dwarfed by other demographics.

Single people under 35 have just 1 per cent of their assets in shares, while those aged 65 and over have 14 per cent.Source:Supplied

The lessons we got are different to the one previous generation parents learned. And they may not be too helpful. The younger you are the more it makes sense to invest in stocks, because the longer you have to ride out any bumps.

Over the long run, the history of the All Ordinaries index (a bunch of top stocks on the Australian Stock Exchange) is very positive. As is the history of almost every stock index in the world. In this context, 2007 looks more like a blip.

The sharemarket has a clear long-term trend.Source:Supplied

Individual stocks go up and down. They are risky. But if you own a few, the risks of one even out with the risk of another, and the expected returns are far better than the upside of leaving your money parked in the bank.

Leaving money in the bank is safe in the short run, but it can be risky in the long run if you miss out on a huge upside.

Young single people (the poorest demographic) have seven times as much money in the bank as in shares. For the richest demographic, which is couples aged 55 to 64, that ratio is less than three. Should we all be learning from the old and sticking our money into stocks?

You don’t see a lot of young people following the stock market, and that’s a problem. Picture: Toby ZernaSource:News Corp Australia

PERFECT TIMING

Stock investors are full of little sayings, and one of their favourite ones is this:

“Time in the market beats timing the market.”

Even in this millennium, most of the time investing in shares has been a good idea. This next chart shows in grey times the index was higher than it is now. In the past 16 years, 23 per cent of the time was a bad time to buy, but 77 per cent of the time, you’d be ahead.

They’re pretty good odds.Source:Supplied

Yes, if you’d invested your life savings in October 2007, you’d have made a frightening return of minus 22 per cent. From where we stand now, most of the past three years were a bad time to invest too.

It’s worth remembering stocks pay dividends too. As part owner you get a cheque in the mail every time they make a profit announcement. Many big companies pay more in dividends alone than you get leaving money in the bank.

SO SHOULD YOU BUY STOCKS?

Buy when there is blood on the streets, they say. The current fears about China’s economy might look like silly in five years time if the index goes through 10,000. Of course, buying now might seem mad if stocks it is at 400 in 10 years time too.

Nobody can tell the future. There’s a million reasons why buying stocks might be a really terrible idea.

Just this week the head of the Reserve Bank was in New York, telling the whole world he was not very confident we know how to make the economy grow like it used to.

There’s also something called the equity premium puzzle, which is basically saying stocks perform much better than anyone has any reason to expect. Nobody knows why and that makes some people very nervous the great performance of the past century or so could simply be an anomaly.

One last thing for young people to remember is that by the time they retire they’ll probably have far more super than the previous generation.

Whether you realise or not, your super fund is probably investing in Australian shares. Maybe it makes sense not to double down on that bet.

Overcoming that GFC trauma and sticking money in the share market is definitely going to be difficult. Would it be worse to let that trauma leave you languishing behind the rest? Or worse to fight the trauma, invest your money and see it shrink? Only you can decide.

Jason Murphy is an economist. He publishes the blog Thomas The Think Engine. Follow him on Twitter @jasemurphy.