WALL STREET MONEY MANAGER: Here's How Millennials Can Start Investing Right Now
The problem is that if they don't, they'll lose their most valuable asset in the market - time.
That's why Patrick O'Shaughnessy, a portfolio manager at O'Shaughnessy Asset Management, wrote a book about how millennials can get over their fear and into the market. It's called Millennial Money: How Young Investors Can Build a Fortune.
Business Insider caught up with O'Shaughnessy to get his thoughts behind the book. Our key take away? Start investing soon, but don't get obsessed. Try to set and forget your investments as much as you can.
"Make it all automatic and check your accounts as infrequently as possible," O'Shaughnessy told Business Insider. "Check out the services offered by Wealthfront, Acorns, Liftoff, and Vanguard that automate the entire investment process. The less involved you are, the better. If everything happens behind the scenes, you'll be less tempted to make short-term (and short-sighted) changes to your portfolio. You'll building wealth slowly, over the long term - which is the way it should be."
What's more, you - the investor - are probably not as great a market timer as you think, as evidenced by this chart O'Shaughnessy sent over. A lot of the crowd tends to buy stocks high and sell low. Not a good call.
Patrick O'Shaughnessy
"Human nature compels us to do the wrong thing at the wrong timewith alarming consistency," said O'Shaughnessy. "The investing public buys at market peaks (think 2000) and sells at bottoms (think 2009), when they should be doing the opposite. If you can remove your emotions from the equation, you'll do well. As all investors eventually find out, that is much easier said than done."
Read Business Insider's full Q&A with O'Shaughnessy below, and you can check out the book here.
Business Insider: How long have you been investing?
Patrick O'Shaughnessy: Eight years. I opened my first account at age 21.
BI: Did you always know you would?
PO: No. I studied philosophy in school, which Ambrose Bierce described as "a route of many roadsleading from nowhere to nothing," so I was somewhat clueless. Even though my father was in the investing business, I still needed to learn the basics.
BI: How did you start?
PO: How everyone should: I put as much as I could into my 401(k) and then contributed to a separate investing account as well.
BI: What's the easiest way to start investing? Make it all automatic and check your accounts as infrequently as possible. Check out the services offered by Wealthfront, Acorns, Liftoff, and Vanguard that automate the entire investment process. The less involved you are, the better. If everything happens behind the scenes, you'll be less tempted to make short-term (and short-sighted) changes to your portfolio. You'll start building wealth slowly, over the long term - which is the way it should be.
BI: How did you get the idea for this book?
PO: Millennials have only heard investing advice from long-time industry vets, not from one of their own. Millennials also tend to be overly conservative with their investments, so I wanted to help them redefine what is risky and what isn't when it comes to their money. I wanted to reach the newest generation of investors and give them the background they need to get off on the right foot - and invest with success.
BI: Why's your book important?
PO: Most people don't start thinking about investing until after they've already squandered the best investing edge out there: youth itself. This book should help many young people fix that problem. Our schools don't teach us much about investing and personal finance, so we have to teach ourselves. In my experience, when you walk young people through the basics, they start investing right away. That is my goal with this book: to convince millennials to invest earlier and in greater quantities than they would have otherwise.
BI: What's the most dangerous thing about investing?
PO: Getting in your own way. Human nature compels us to do the wrong thing at the wrong time with alarming consistency. The investing public buys at market peaks (think 2000) and sells at bottoms (think 2009), when they should be doing the opposite. If you can remove your emotions from the equation, you'll do well. As all investors eventually find out, that is much easier said than done. I spend several chapters in the book explaining how to overcome our investing emotions.
BI: What's the hardest thing about investing for you?
PO: Being patient. Millennials are the instant-gratification generation, so the fact that investing takes so long to work can be frustrating. Good investing is not fast and interesting, it is slow and boring. So in this case, boring is good.
BI: How much money should you start investing?
PO: As much as you can. There is nothing better than maxing out your 401(k) contribution. It's obvious advice, but it's true. If you start young enough, your young money has tremendous potential even in very small amounts. Get going!