If You Can: How Millennials Can Get Rich Slowly
By William Bernstein, MD
Free Download at the end of the review!
Cathie Eitelberg, Senior Vice President, National Director, Public Sector Market characterized the Millennial Generation at the annual meeting of the National Association of Government Defined Contribution Administrators, 2015 as:
• More Educated
• More Ethnically Diverse
• More Liberal
• More Open to Innovation
• More Upbeat About the Ability to Affect Change
• More Focused on Communal Outcomes
• Less Religious
• Less Trusting
• Less Committed
If You Can: How Millennials Can Get Rich Slowly by William Bernstein, MD. Review by Steve Schullo
Dr. Bernstein starts with a simple three-fund portfolio. The Total Stock Market Index, Total International Stock Market Index, and the Total Bond Market Index are spot-on for those who already have the basics of a diversified investment solution. Others may scratch their head or shrug their shoulders, and return to fiction. Unknown obstacles may occur when they ask their employer’s plan administrators for these three indexes, only to be told, “no, we don’t have those three indexes, but we have yadda, yadda, yadda.” The millennial may respond, “huh”?
Other potential investors may think, “Shall I delay,” given the gyrations of the stock market’s current volatility? “Whom can I ask for professional help?” or “What in the world is a fiduciary, some exotic bird sanctuary?” Dr. Bernstein lists and addresses these concerns for newbies in five categories of he calls “Hurdles” and follow-up reading material for each:
Hurdle one: Excessive spending. Recommended reading: The Millionaire Next Door by Thomas Stanley and William Danko. (I also recommend a blog, Mr. Money Mustache. He writes imaginative and practical articles about the most boring and unappealing characteristics of personal finance, frugal living).
Hurdle two: Not understanding the basics of theory and practice of finance. Recommended reading: Jack Bogle’s classic, Common Sense on Mutual Funds. This book is probably the best introduction to basic finance ever written.
Hurdle three: History. A colorful and interesting stock market history does exist! Three recommended books: Devil Take the Hindmost by Edward Chancellor, The Great Depression: A Diary by Benjamin Roth, and in a recent interview he also suggested Extraordinary Popular Delusions and The Madness of Crowds by Charles Mackay.
Hurdle four: Know thyself. Recommended book, Your Money and Your Brain, by Jason Zweig.
Hurdle five: Recognizing the financial industry professionals for whom they really are–self-serving. Evolving to a Do-It-Yourselfer (DIY) is the best advice offered. The reading assignment is the same as Hurdle Number Two: Common Sense on Mutual Funds by Jack Bogle. If you devour the details of this book, you will know more about investing than most professionals. If you know how to invest, you will see what the financial industry is up to and you will avoid their sales pitches with confidence.
Dr. Bernstein’s book is an aggrandized “Cliff Notes” to focus and encourage Millennials to begin a serious study for the next year or two of additional readings.
I want to elaborate on Hurdle Four. “Know thyself” cannot be learned from reading alone. Even Sir Isaac Newton lamented, “I can calculate the motion of heavenly bodies, but not the madness of people.” Newton struggled bitterly trying to find out what went wrong with his investments during the 1746 South Sea investment crash.
The surest way to build mental toughness and discipline is to experience losses with your real money. Readers who understand their emotions will benefit by knowing their unique balance between taking on too much portfolio risk or being too cautious. If novice investors have prepared themselves to suffer through short-term losses and experience recovery, you will be okay. Recall the title of this book, “… Get Rich Slowly”. There is only one part of the financial industry you can trust, and that’s the worldwide economies will grow overtime. Be patient. Time is on your side.
Jason Zweig’s excellent book (Your Money and Your Brain) will focus your understanding of how other investors react to stock market gains and losses. Investors need their own experience in the school-of-hard-knocks. After reading Dr. Bernstein’s recommended books, most novice investors must experience by living through stock market volatility to understand their reactions when Mr. Bear Market comes growling. Why? If an investor is not prepared mentally, a carefully constructed low-cost portfolio is abandoned faster than a cockroach scurrying from your kitchen light.
This reviewer learned the hard way and took a working career to comprehend the investing process and balanced thinking, but never regretted massive investing mistakes. In hindsight, losing 70% was painful with the incessant question, what was I thinking? However, those mistakes turned out to be valuable learning experiences, saving tens of thousands in excessive investment costs in subsequent years with an appropriate risk and return, low-cost balanced portfolio.
Congratulations for finding this excellent book–you will thank yourself 30 years from now. Learning to be a DIY takes time, and for some, perhaps a painful experience or two. Don’t be discouraged if you stumble. Always remember, mistakes can be valuable learning experiences, far more valuable than spending several percentage points year-after-year when you turn your decisions over to a financial adviser or broker.
Final note: The author praised the genuine greatness and unpretentiousness of John Bogle, the founder of the Vanguard Group. For decades, Bogle has been the only person in the financial services industry who gave Vanguard’s profits back to clients. Subsequently, Vanguard has grown to be the largest and most respected investment company in the world. Twenty million investors with over three trillion in assets participate in Vanguard, agreeing with Bogle’s over-the-top concern about giving us regular folks a fair chance against Wall Street’s innate greed.
Best of fortunes.
FREE pdf download of Dr. Bernstein’s book, If You Can: http://www.etf.com/docs/IfYouCan.pdf ENJOY!
International Business Times interviews Dr. Bernstein: http://www.ibtimes.com/investing-advice-millennials-financial-guru-author-william-bernstein-tells-you-what-2116914