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The Millennial Investor

Bored, agile, and empowered by commission-free brokers, the Millennial investor buys on margin and bands together with like-minded peers on social media to move markets across the globe. Growth stocks, cryptocurrencies, and most recently NFT’s all profited from the wave of digital natives entering the space. Interconnected and with an edge for tech, these investors seem destined to outperform Generation X and Baby Boomers alike. Yet, there are some long-term strategies worth remembering in today's speculative and volatile markets.

I’ve invested more time writing and researching this article than I’d like to admit. Hell, I probably worked more on this thing than attended university this year. Either way, here it is. Distilled, summarized, with some analogies and true stories. Pour yourself a drink and dive in.


1 Largest Generation in History

Born between 1980 and 2000, Millennials make up one of the largest generations in history. Even though they got less money to spend than previous generations, and postgraduates are virtually drowning in student loan debt, Millennials are reshaping the economy in a new digital world (1). For centuries, the way of life was simply handed down from one generation to the next with minor alterations. Yet the digital age turned tables and it’s the Millennials guiding their predecessors into a new era. Instead of asking the shop assistant about what to buy, online reviews determine our purchasing behavior. While their parents were experts at something, the Millennials are expert Googlers.

As this generation comes of age and moves into its prime spending years, its purchasing behavior is translating in to a wave of innovation (2). Millennials were the first iPhone users, Tesla buyers, and signed up on discount brokers to manage their finances. They also suffered through three major crises, including the dot-com bubble, the great recession, and most recently the Covid pandemic. Eventually, the world moved on and companies not responding to Millennials’ needs found themselves quickly amid falling stock prices and foreclosures. Remember Nokia and Kodak? Me neither.

Millennials have an edge: They know what matters in a new digital world and can bank on it. Moreover, they will inherit over $30 trillion in the next thirty years, making the generation the most influential in history. Still, they lack experience and are suffering more from FOMO (Fear of missing out) than any other generation preceding them. Time to check in with your self-awareness.

2 The FOMO Game

Daddy Elon Musk, some guy called Satoshi Nakamoto or doggy coin trades might have treated you well these past few months or even years. But it is worth remembering that the first experiences with investments have a disproportionate effect on your self-perception and abilities. You might think you are the next investment Messiah and need to slide into your friend’s DMs to tell them about the next big thing. If that’s you then you are prone to be overconfident. Your portfolio is likely to come crashing down in the future because you bulldozed your way from one hype to the other. Markets often trade sideways and there inevitably are times of downturns and bear markets.

When Bitcoin and cryptocurrencies were virtually unknown, it was the Millennials who mined the first coins and spent them on Pizzas or drugs on Silk Road. Today, wealth managers across the board from the likes of JPMorgan and Blackrock are invested to some extent in the crypto market. Whether you believe in the potential of virtual currencies is beside the point as it just comes to show that the tech-savvy generation was one step ahead of the field. Fast forward, Tesla and again Millennials got one up against Wallstreet. They were the first to understand the Electric Vehicle market and also the first-movers to dabble in EV stocks, resulting in outsized gains.

Most recently, online forums such as r/wallstreetbets on Reddit got quite some airtime on mainstream media channels like CNBC or the WSJ. Yet these networks often missed the point and just marked the generation as a young, reckless group of investors buying into a hype without doing the math. Yet some do the math. Because they have an edge in the tech space, are fee-sensitive, and better connected than any other generation. Whether it's cryptocurrencies or Tesla the last few years proved favorable to the tech-savvy investor. They understand that most wealth management funds underperform the broader market. Self-confident and determined, they learn and invest their money themselves.

However mind you, that only a third of Millennials are invested and just a fraction is highly successful with their investment strategy (2). In addition to the early adopters, there are Newbies and inexperienced FOMO traders playing the market. People that open an investment account because they read online that it’s easy and everyone can do it. Although the latter statement is true, it doesn’t mean that dumping your life savings on option trades is the move to make.

If you already have a successful track record and outsized gains it is worth taking some risk off the table and maybe pay off your loans, credit card debts, or mortgage. Your ability to invest successfully, in the long run, is not determined whether you hit a few good points, but how consistent you run your laps. Stay humble, track your portfolio even in bad times and learn from your mistakes when you underperform the broader market. A 5% annual Vanguard 500 Index Fund ETF might not sound sexy. Yet if your stock picks end up costing you, it is a welcomed alternative to diversify your portfolio.

As Warren Buffett once put it after being asked why his simple investing strategy isn’t just copied: “Because nobody wants to get rich slowly”. Returns pretty much suck when you invest $100 or $1’000. The prospect of getting rich with 5-10% annual gains is dim. Then you go online, and a YouTube ad is hitting your screen with a quick-rich scheme and eventually you tell yourself fuck it and go all in. And maybe it works at first and you double your money. Like a good round of blackjack, things look pretty good at first. But in most cases, odds turn against you.

Mistakes to Avoid

Short-expiration options, investing on margin, and then eventually getting margin called while losing your life savings isn’t all that appealing. Besides, not everyone can get rich investing money. The overall market (S&P500) moves give or take around 8% upwards per year. All returns above that are compensated with losses on the downside. So, in case you don't have an edge or are a professional trader here is a quick overview of mistakes to avoid as a newbie, or in general for that matter:

  • Option trading, especially at the beginning of your investing career

  • Trading 0-day expiration option

  • Buying stocks on leverage

  • Buying so-called meme stocks

  • Shorting stocks

  • Aiming for short-term gains; If you can’t handle a significant drop in the stock, don’t own it in the first place.

  • Panic sell

  • Get greedy; Bulls make money, bears make money, pigs get slaughtered.

  • Oh, and don’t be the guy trying to figure out how to take physical delivery for a WTI oil futures contract because he forgot to sell it before expiry.

Maybe you lost money investing like a madman, or maybe you got out early enough and think you are a heck of a trader. Either way, long-term strategies eventually matter and will help you hold on to your gains and establish your investment strategy for the long run.

3 Long-Term Investing Strategies

Before we get into the juicy details, think for yourself: What are you shooting for? What is your financial goal? How risk-sensitive are you? Answering these questions will help to set you up for eventual success and develop your individual asset allocation strategy accordingly.

3.1 Active vs. Passive Investing

You’ve decided to use your savings and invest your money in the stock market. Yet you are undecided whether to spend it on low-risk index funds or whether you should actively pick your stocks. Active trading involves beating the overall market to make it worthwhile: bearing in mind that most stocks lose money over time. Just 1 out of 25 stocks will deliver the most gains of the overall market. Adding to that, the stock market declines 1 out of 3 years with declines of 10% once a year, 20% every five years, and 30% once a decade.

But hold on you might think, what if you could time the market? Timing the market resembles an infinite money-making machine where you couldn’t be bothered reading up on long-term investing strategies on some online blog.

Let’s get to the facts: actively trading stocks, and timing market entries and exits come with inherent risks. Missing the best 10 days in the market between 2010 and 2020 would mean an overall decline of 33% (see Bank of America chart below). Moreover, it is unlikely you sell your assets right before a crash and buy back at the bottom. In most cases, the worst days are followed by the best days which would put you back on square one holding your cash waiting for the crash.

Timing the Market

So, let’s get realistic.

In conclusion, passive investing is meant for the broad majority whilst active investing is meant for a more specialized and competent clientele. With regards to passive investing Tony Robbins’ book Money Master the Game is a worthy read.

What I didn't get into in this article is the trend of day-trading, or frequent trading activities in the retail space. Let me just briefly list my reasons why I discourage it.

Disadvantages of traders:

  • Market losing for most

  • Money-losing for many

  • Distracts from business focus

  • Spurs institutional manipulation

  • Prevents compounding

  • Investing builds businesses, markets, wealth; trading doesn’t

  • Systems should discourage trading

If you still feel the urge to invest in GameStop, space companies, or other Meme-stocks: set aside a casino budget and gamble away. Your long-term ship can withstand the occasional hits if you are not overleveraged in high-risk trading schemes.

If you want to sleep soundly then investing in passively managed Vanguard 500 Index Fund ETF indices is the way to go. If you rather invest in a few stocks that you believe in and want to advance from just a consumer to an investor, read the next section.

3.2 Stock Picking

You’ve decided that passive investing isn’t your thing. Moreover, you have the time and energy to put in the legwork and become an excellent company picker. Because after all, holding stock means participating in a business’ success. Stock price movements and actual business performance are correlated but behave quite differently. Best described is this difference in the words of billionaire investor Ralph Wanger in his analogy of the stock market to a man walking his dog in New York:

“The man has done the same walk for decades, starting at Columbus Circle, strolling through Central Park, and ending at the Metropolitan Museum of Art. The dog has boundless energy and never walks in a straight line. He leaps randomly from one direction to the next, stops to smell every leaf, barks at other dogs, and jumps on you for no reason. At any moment, there is no predicting what the dog will do or which way he’ll leap. His movements are totally unpredictable.

But you know he’s heading northeast at about 3 miles per hour, toward the museum, where he’ll eventually end up because that’s where the owner is taking him. What is astonishing is that almost all investors, big and small, seem to have their eye on the dog and not the owner.”

Strategies to Pick Stocks

Although stock-picking follows a more active approach, long-term investing means being active 1% of the time while leaving your portfolio alone for the other 99%. It is important to keep in mind that less than 10% of all public companies drive 100% of long-term stock-market returns. Therefore your mission is to find the 10% and patiently ride the wave.

Some hands-on advice:

  • Limited diversification, as you cannot continuously research each company you are invested in on a regular basis. The range of 10-15 stocks is healthy, otherwise, go back to the previous section and consider passive investing.

  • Flexible & innovative companies can adapt their business model and expand their market potential. The companies with today’s highest market caps all have this trait in common.

  • Don’t ignore what is familiar, in 1966 Walt Disney was valued at $80 million and they just produced Mary Poppins turning over $30 million alone on that movie. The company was well-known and anyone could have picked up a few shares. $1000 invested back then would average you over $4 million today.

  • Know your strengths and profit from them. If you are mathematically gifted then focus on the fundamentals. If you work in the industry and know the competitive landscape and product lineup, do that. Find your own style of investing.

  • Google is your friend, look up the approval rate of the CEO on Glassdoor, read job reviews, check the company’s premises on Google street view and go on the investor relations site of the company. You need to do your own due diligence because nobody physically audits the business you invest in.

  • Leadership and the CEO are decisive for the long-term success of a company. If the leader of a company is also its founder and owns lots of stock in it, the interests are aligned with the other shareholders and hence money is invested more efficiently.

  • Human resource management such as low employee turnover, revenue per employee, diversity, inclusion, and so forth.

  • Deep dive into the company: How does it create revenue? What is its market potential? Market growth versus the overall market potential of S&P500? What are the competitive advantages? Cashflow structure? Insider selling? Check on earnings calls, shareholder letters, and sweat the fundamentals a little bit.

  • Impact: Does this company contribute to a better future?

  • Don’t overpay because even great companies can be too expensive when too much of their future earnings potential is already priced in. Microsoft’s revenue was 3x higher in 2009 than in 1999 and still, the stock had lost 50% of its value in that timeframe.

  • Avoid owning a stock you can’t explain or you lack conviction in.

  • Double down on companies that you are convinced are great investments for the long run even if you already own shares. If the business proves viable and returns are increasing, then it is likely to follow that trajectory in the near future.

  • Hold & wait: trade as little as possible to avoid taxes and to enjoy the runups. The shorter you hold an asset the greater the chance that you have to close the position at a loss. The magic of compound interest will do the rest for you.

  • “Don’t lose money” – Warren Buffett & treat every dollar as an investment.

I believe that beating the market is possible if you are patient and willing to invest time. After all, the business world is like a car race. In the last quarter of the race, it becomes more evident who might win, and your odds can be calculated with minimized risk exposure. Then you invest in the top-performing racers and still reap much of the benefits.

Keep in mind that most stocks underperform the market. The outsized gains of a few winners are pushing your portfolio higher and make up for any losses on the way.

3.3 Cash

Oh, sweet cash sitting ducks in my account, what am I going to do with you? At current rates of around 1% (if even) it would take 70 years to double my money. By that time it is more likely that I am buried 6 feet underground. I wouldn't even get to experience my slim gains.

Yet there is some upside to holding a percentage of your overall portfolio in cash. Besides, you can’t pay your expenses off by handing out your stocks. Holding some cash is in both active and passive investing approaches decisive. I advise holding approximately 5-15% of cash as it allows you to:

  • Leave your portfolio in peace

  • Remain calm during market volatility

  • Jump in when prices are low and be opportunistic in the markets

Buying stocks in times of recession has historically brought about outsized gains for investors. It is worth remembering, the more it hurts holding some cash in market booms the more likely you will profit from a swift down-market. The best time to hold cash is when it really hurts to do so. Holding cash allows you to be prepared, and you don’t have to worry about timing the market.

4 Summary

Successful investing and getting rich is rarely the end goal. Therefore you need to figure out what's your aim in this game. Whether it's financial independence, being debt-free, building a house, a business, or just making this world a better place: figure it out. At the end of the day, you realize you are satisfied with far less, and the happiness you gain from monetary wealth is not of owning it but what you do with it.

Money gives you the freedom to spend your time doing what you really want to do in life. Therefore investing your capital as if your survival depends on it isn’t just a paraphrase: it does. With wealth inevitably comes a great responsibility: your capital and mine are shaping the world. Be mindful of where you put your money because it does have a real-life impact. And don’t be discouraged by down years because even the greatest investors don’t have steady returns.

Be aware of your own behavior and mind. Don’t fall into the sunken-cost fallacy and hold on to bad investments unnecessarily long. Or panic sell because your loss aversion kicks in. Wharton professor Jeremy Siegel once said: "Volatility scares enough people out of the market to generate superior returns for those who stay in." Time is in your favor.

The most important part of an investing strategy is your ability to stick with it. Successful investing is pretty boring, consisting of patience and inaction. Putting up with this boredom year after year and mastering it to perfection is a serious skill. Someone will always be getting richer than you. This shouldn’t bother you as you are on your own journey towards your goals.

For more helpful books on finance & investments, see book list.


1 Millennials Coming of Age published by Goldman Sachs Global Investment Research in 2015.

2 The Millennial Investor Becomes a Force published by Accenture Wealth Management in 2017.

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