High-risk investing is better for the young? Why?

Question

I have heard statements such as the question's time. Basically, it's a financial motto: "If you're young, take on more risk." I don't really understand it. I figured risk-tasking is a personal/personality kind of thing -- not necessarily a young vs. old/older kind of thing. What is the importance or benefit of the assumption that high-risk is preferable for younger people/investors instead of older people? Me? I personally believe risk is more rewarding potentially, so it's worth it (yes, I am young). I throw around $500 a week in to stocks, gold, and other small projects (I have a high-risk portfolio of around $20,000.00 so far). I plan to be a hedge funds manager or the like. Would my high-risk investment choices, aside from the main question, have any bearing on the road I want to go down and test (managing mutual/hedge funds)?

Answer 1

High risk investing is by definition risky regardless of who is doing the investing.

Some people will say that young investors should have a higher tolerance for risk because they are likely to have more time to make up for any losses as well as more time to capitalize on compounding returns from successful investments.

At the end of the day, investing involves risk, and risk levels and appropriate tolerance for risk varies widely per person, and is based on each person's specific financial circumstances.

Answer 2

I think yours might be an exceptional case, most young people wouldn't have $500 per week to invest ($2k per month). In general, high risk investing for younger people is not highly recommended particularly when their income or careers are not super stable yet. In your case, high risk is likely more feasible based on your net income and you can likely 'take the hit' on your budget as it is not part of the budget needed to sustain your daily/monthly living.