Why young people MUST invest in stocks

There are many studies showing that young people classified in the millennial generation are making two major mistakes with their money. First, they are not saving and investing at all. Second, when they do invest, they are way too conservative. It is understandable for a recent graduates not to invest if they are saddled with student loan debt. What is inconceivable is for these same people to have their 401k plans filled with cash and bond funds. The numbers eviscerate this strategy. While many young people have let both the tech bubble and great recession sour their attitude toward stocks, their short term thinking will seriously jeopardize their ability to fund retirement.
According to Morningstar, small company stocks from 1/1/1926-12/13/2011 returned five times as much as either cash or bonds. With a time frame of forty years, young investors should cheer a few more crises. This would enable them to acquire more shares at lower prices. There has never been a twenty year period when investors have lost money. The only real protection against the ravages of inflation is to own a portfolio of businesses that are consistently growing their profits and increasing their dividends. The one lesson young investors must ingrain into their memory is the following: The real risk is not in owning stocks but in not owning enough of them.