Applying stock portfolio strategy to the lessons of being a young adult.
My favorite investments book is titled A Random Walk Down Wall Street by Burton G Malkiel. In it, Malkiel likens stock investments to taking a random walk. Basically stating that a monkey, throwing darts at stock symbols, can do better than “experts” at building a stock portfolio in the long-run. He then goes into detail of how to diversify your portfolio to best even the monkeys. This same principle can be applied to being a young adult.
Random (or Not So Random) Stumble
In life you will always face the temptation to listen to the experts. These “experts” come in the form of parents, friends, relatives, co-workers, employers, or anyone else giving life advice. We need to know better. Although they’ve lived life, much like investment brokers live the stock market, they don’t know what we’re going through. People on the outside don’t know the best long-term results or the future we’re mapping out for ourselves. Instead, we need to focus on diversification.
Diversifying Our Personal Portfolio
In A Random Walk Down Wall Street, Malkiel gives a detailed breakdown of where we should invest our money. Giving percentages to put into gas stocks, international commodities, gold, and so on. However, there isn’t a diversification blue print for young adults. The best portfolio diversity we are offered is trying new things. And guess what, as young adults we are the most able to try new things. The one advantage young adults have over everyone else in the labor market is time. We have time to stumble, fall flat on our faces, buck parent’s advice, and build our own portfolios.
Time is on Our Side
Our long-term goals are far away. Things that are far away are difficult to achieve because we don’t know what might be three-steps in front of us. What we do know is the step we can take tomorrow, and the lessons we can learn from that step. Time allows us to diversify our portfolio and re-calculate where needed. When we don’t achieve what we were expecting we have time to correct course and point our compass north again.
We must use this advantage to help us achieve far off successes. Even if we are stumbling today, we can use that stumble to make the best of our current situation. A random stumble may seem foolish, but even a monkey can do it.