Millennial Money | Patrick O’Shaughnessy

Summary of: Millennial Money: How Young Investors Can Build a Fortune
By: Patrick O’Shaughnessy


Dive into the world of smart investing with ‘Millennial Money: How Young Investors Can Build a Fortune’ by Patrick O’Shaughnessy. This book summary reveals the importance of investing in the stock market at an early age, guiding you towards financial stability and success. Explore the consequences of the aging population on governmental retirement benefits, and learn why diversifying your investments is crucial in an unpredictable financial landscape. Discover winning strategies such as the Millennial Money strategy, as well as the value of separating emotions from investments.

Financial Stability Starts with Investing Early

Building long-lasting financial stability is a goal everyone should work towards. Creating a savings account is not enough to achieve it, as the real value of your money decreases due to the inflation rate. Instead, investing in the stock market is a smarter option as it yields higher returns over a longer period. Starting early gives you more time for your investments to reach the value needed to lead the life you want. Unfortunately, due to events like the 2008 financial crisis, Millennials tend to be more risk-averse and therefore less likely to invest in stocks. However, investing in stocks at an early age can lead to a wealthier future.

Retirement Benefits in Peril

Many people assume that they do not have to invest for the future because the government will provide a pension after retirement. However, this perception is flawed as the aging population of America increases the pension and healthcare costs for the government. With each passing year, there are more people living past retirement age, and this trend shows no signs of slowing down. As a result, it puts a significant financial burden on the government with higher pension and healthcare costs. Unfortunately, the trend is expected to continue as more baby boomers retire, making the situation more challenging. It is essential to note that the government runs like a business and must receive enough taxes to match the benefit spending; otherwise, it risks bankruptcy. Currently, there is a $9.6 trillion gap between the projected spending on benefits over the next 75 years and what the government expects to raise through taxes, showing the retirement benefits are in peril. Millennials are likely to suffer the most as they are currently paying taxes to support the elderly and will not receive the same benefits when they reach retirement age. Therefore, Millennials must start investing early in the stock market to support themselves without government assistance.

Don’t Put All Your Eggs in One Basket

Investing in diverse companies across the world is crucial for long-term success in the stock market. Many investors make the mistake of putting all their money into a few companies in one country, which is a risky strategy. The Nikkei index in Japan in the late 80s is a prime example of how investing in a seemingly strong market can lead to massive losses if a financial bubble bursts. To protect your money, diversify your investments in large, diverse areas. This approach not only safeguards your portfolio but also helps you earn more as global currencies change in value. Remember, when you buy stock market shares, you’re not only investing in the company, but also in the currency. Don’t get swept up in familiar companies; get out of your safety zone, and spread your investments wide.

Be Different: A Guide to Maximizing Returns on Your Investments

Investment experts often recommend the Sector Leaders Strategy of buying shares of the best-performing companies determined by a particular market index. Following this tactic, you could invest in index funds that aggregate stocks from the 500 biggest companies, leading to good but not market-beating returns. However, the biggest companies tend to underperform when they reach the top, making investing in them a less profitable choice. Instead, you can consider alternatives like the Sector Bargains Strategy, which involves buying the cheapest stock, not the best, to maximize returns. Surprisingly, such an approach often outperforms the leader strategy in the long-run. For instance, since 1979, the value of the Russell 3000, following a bargain strategy, has outperformed the S&P 500 by more than 1,100 percent.

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