If Warren Buffett had an ounce of typical Millennial in him, he sure as hell wouldn't be a billionaire and the most successful investor on earth.
Why? Because Warren Buffett takes risks. Warren Buffett is okay with losing money every now and then. Warren Buffett made a conscious effort to surround himself with smart people. Warren Buffett didn't walk around with his hand out, waiting for every "deserved" opportunity to fall in his lap. And Warren Buffett invested with his head, not his heart.
I'm a Millennial myself and I'm confused by my own generation when it comes to these ideas. As this blog's readership continues to expand, I get more emails and people tend to ask me things about investing as if I were some sort of expert. (I'm not—there's a difference between enthusiasm and expertise).
I love a great email question, blog comment, or in-person conversation! I'm not going to tell you how to invest, or what decision to make, but sometimes it helps to toss ideas out there and share thoughts on different subjects. Hopefully it starts your cognitive motor, gets you into gear, and you make a prudent decision on your own. Often I learn as much as you do from these interactions.
One thing that I'm noticing from my own generation is this insane aversion to what made Warren Buffett so successful. I see Millennials in a total investment freeze because they can't decide between a Balanced or Assertive spud portfolio; as if it's going to make a difference on their $5,000 investment account.
They ask if Bitcoin should be part of their portfolio (everyone else is doing it). They're afraid to invest at all-time highs (stocks could crash). The humming and hawing about pot stocks (it's going to be legal).
If you're 25 years old and have impressively avoided spending every last nickel on phone data, avocados, and gasoline to get to a pipeline protest, it is time to use your head and take a damn plunge on something half-smart.
Make a decision, take a risk, possibly lose some money, learn from smart people, and carve out your own future instead of expecting the government or your mom to look after you. Yes, it's alright to lose some money; as long as you learn from every mistake and get progressively better, loss can be a good thing.
Say you're starting out and invest every last dollar to your name on stocks. Who cares if the market drops 50%? We're probably talking about a couple thousand bucks anyways. It makes no difference in the long run. You just save a little more aggressively, buy that loss back, and keep digging. Simply learn to make a decision and learn from your mistakes.
Just learning these are great skills: opening a brokerage account, putting in buy and sell limit orders for ETFs, seeing your account go up and on good months and down on bad ones. It's all fun and games.
That's right, investing is a big game. It's an important one, sure. But it's still a game. It involves strategy, risks, perpetual learning, and the occasional mistake. It's much better to learn the game with $10,000 at 23 years old than $500,000 when you're fifty and only have a few years left before traditional retirement.
It's also much better to learn money management on your own while you're young than to depend on an old suit to hold your hand for 1% or more each year. There's nothing wrong with paying a smart gal for some advice, but don't overpay just because you are scared to do something yourself. Self-directed investing and personal finance knowledge are valuable; even just 1% is a large chunk of money to pay for advice if you have a $2 million portfolio.
Chances are if you learn a few things with a couple grand in your early twenties, you will have a lot more money when you are fifty. Maybe you won't need to work for the man when you're fifty. Maybe the spoon-fed and shaky government old age handout scheme is irrelevant to your well-being in your senior years. Isn't that a crazy idea!
The Buffetts of the World
The world is full of Warren Buffetts that dominated the generations before ours. Buffett is just an example. You've got Charlie Munger of Berkshire, Jeff Bezos of Amazon, the nerdy guys from Google, Bill Gates, Jimmy Pattison, etc. The list of these self-made billionaires goes on.
These older generations can teach us Millennials a few things, if we're willing to learn and act.
Warren Buffett left his mom's basement in Omaha and moved to New York to find a great mentor in Ben Graham—the father of value investing. He then folded an investment partnership that made him multi-millionaire in his thirties, instead taking a chance on the insurance business. He wisely saw an opportunity to capitalize on insurance float money for free investment funding and better tax efficiency than was available to him otherwise.
Charlie Munger left Omaha, joined the military, went to law school, became a real estate investor, and committed himself to perpetual learning. This eventually made him a stock investing billionaire and one of the smartest guys on the planet. Charlie is rich because he understands human nature better than nearly anyone. (Listen to him on Youtube).
Jeff Bezos left a lucrative Wall Street tech job to start a company from his garage that sold books online. This little venture is Amazon, one of the most diverse web companies in the world. He takes calculated chances every day on tech gadgets, sales promotion schemes, shipping innovation, and so on.
Bill Gates left Harvard to start a tiny little programming company. Thanks to a little programming talent, a few bold risks, and a lot of legal prowess, deal after deal resulted in what is Microsoft today. Thanks pretty much to creating that little licensing agreement box that you click "I Agree" on every time you install some software, Gates turned Microsoft into a software giant which earns billions in profits each year.
Look at everyone that's successful and you will find the same patterns. They take risks; they accept the idea of loss; they learn from every mistake; they think independently; and most important they spot and pursue opportunities.
If you see an opportunity, think through the possibilities, be objective, and, if things line up, formulate a plan and commit to the plunge! It's easier to take these opportunities if you still live at home, have saved some money, and are young and have a long timeline.
Comments & Questions
All comments are moderated before being posted for public viewing. Please don't send in multiple comments if yours doesn't appear right away. It can take up to 24 hours before comments are posted.
Comments containing links or "trolling" will not be posted. Comments with profane language or those which reveal personal information will be edited by moderator.