Avid readers of this site might already know one of my favourite financial books is The Investor’s Manifesto by William Bernstein. Bernstein is a best selling financial author and was a practicing neurologist. Needless to say he is very bright and his books are witty and fun to read, yes, a financial book can be fun to read. Recently, Bernstein released a short ebook entitled If You Can: How Millennials Can Get Rich Slowly. I recall a few weeks ago this book was free a limited period of time but it’s still cheap for the frugal folks out there for the price of $1.10 CDN.
If You Can was targeted to Millennials providing a trusted recipe for financial freedom; information I wish I read about 20 years ago when I was a trying to figure out the investing universe. Here are my favourite takeaways from If You Can and what Millennials can learn from this bargain book about the five bad things – hurdles as Bernstein puts – that you must overcome if you are to retire successfully.
Hurdle One – You Need to Spend Less and Save More
Bernstein suggests if you want to retire at age 65, starting at age 25, you’ll need to save at least 15% of your income. Young investors would also be wise to kill credit card debt and student loans in that order, before investing writes Bernstein. As part of your financial education, he also recommends you read the famed-book The Millionaire Next Door.
Hurdle Two – You Need an Adequate Understanding of Finance
In this chapter, Bernstein suggests would-be investors take some time to learn about stocks and bonds and the risks associated with owning each asset. On the subject of timing the market and applauding anyone who can, Bernstein wrote: “Say you could time the market or successfully pick stocks. Would you be publishing a newsletter, telling people about your predictions on TV, running a mutual fund, or, ha ha, working as a stock broker? Of course not. You’d borrow as much money as you could, bet on your predictions with that borrowed money, and go to the beach.” To continue your financial education, Bernstein recommends you read another famous investing book Common Sense on Mutual Funds.
Hurdle Three – You Need to Learn the Basics of Market History
“By now you know enough investment theory to understand this paradox: since risk and return are inextricably intertwined, high risk and high returns go hand in hand, and so do low risk and low returns.” Bernstein goes on to share the secret of successful investing over time, buying assets when others are selling them. “Finance, though, for the reasons explained above, is the exact opposite; when all your friends are enthusiastic about stocks (or real estate, or any other investment), perhaps you shouldn’t be, and when they respond negatively to your investment strategy, that’s likely a good sign.”
Hurdle Four – Overcome the Enemy in the Mirror
“Long-term planning, of course, is what investing is all about, and it’s a predisposition that our maker most definitely did not endow us with.” Bernstein’s academia and work as a neurologist provides some great insight into the most important chapter of the book for any investor. To help you wrestle with your worst financial enemy (you), Bernstein recommends reading Your Money Your Brain by Jason Zweig.
Hurdle Five – You Need to Watch Out for the Monsters within the Financial Industry
Although I’m not a Millennial this was my favourite chapter, especially because I enjoyed this Bernstein recommendation: “In fact, the prudent investor treats almost the entirety of the financial industry landscape as an urban-combat zone. To be avoided at all costs are: any stock broker or “full-service” brokerage firm; any newsletter; any advisor who purchases individual securities; any hedge fund. Most mutual fund companies spew more toxic waste into the investment environment than a third-world refinery.” Ouch! He’s got a great point though. Investors must be wary of the financial industry because the industry is very much designed to profit from you and me. This didn’t dawn on me until my late-20s and young investors who read If You Can can get a much deserved head-start on this very subject.
For just over a buck you can own If You Can: How Millennials Can Get Rich Slowly here. As it relates to your financial future this book is worth far more than that.