Investing can feel daunting for newbies.

About 21% of surveyed Americans say stocks aren’t their preferred way to invest because the stock market is too intimidating, according to a Bankrate poll in January. That fear skewed higher for younger people, to 29% of Gen Z members and 24% of millennials, it found.

Putting all your money in cash or bonds may feel safe, because it seems like there’s little scope for financial loss — but this is misguided, according to financial advisors.

“When you’re young, worrying more about downside than upside is probably the biggest mistake,” said Josh Brown, CEO of Ritholtz Wealth Management. “You have to get rich before you focus on preserving your wealth.”

In fact, young people shouldn’t be focused at all on cash positions or bonds in their investment accounts, Brown said. Instead, they should be fully invested in the stock market, he said.

It may seem counterintuitive that stocks are generally the safer route for young investors when it comes to building long-term financial security.

While stocks are generally more volatile than cash and bonds, stocks have also historically outperformed them over long periods — an important factor when it comes to growing wealth and beating inflation, which erodes the value of money over time, experts said.

The S&P 500, an index of the largest U.S. stocks, had an average annual return of almost 12%, including dividends, from 1928 through 2024, according to data compiled by Aswath Damodaran, a finance professor at New York University.

By comparison, 10-year U.S. Treasury bonds and corporate bonds had an average annual return of about 5% and 7% over the same period, respectively, the data shows.

Investors in their 20s and 30s have decades ahead of them for interest to compound and recoup any near-term financial losses from stocks.

“When you’re a young investor, you have something at your disposal that every professional investor dreams that they can have, which is more time,” Brown said.

“When you appreciate how much time you have, you recognize the benefit of long-term compounding,” he said. “Even though you think you’re taking more risk by buying and holding [stocks], you’re actually taking less risk.”