millennial money investing strategy

How Millennial Money Changed My Investing Strategy

Have you read the book Millennial Money by Patrick O’Shaughnessy? I did. And you can read my detailed Millennial Money Book Review right here. But I need to be honest with you…

Even though I liked this book when I read it, it’s not until almost a year after reading this book that I really started to appreciate the value of it. I’m honestly a little bit surprised at the impact it’s had on my investing strategy.

Allow me to explain.

Why Millennial Money Changed My Investing Strategy:

Prior to reading Millennial Money, I was first and foremost a value investor. I really enjoyed looking for 50-cent dollars. And I had fun digging deep into companies to try and find inefficient others had missed.

But that’s hard work. It’s time consuming, and at the end of the day, if you’re buying stocks in downtrend it’s hard to make money. It takes time. And there’s not a clear way to manage risk beyond basic position sizing.

Then Millennial Money provided some data to back this up. Near the end of the book, the author dives into some specific strategies that have historically outperformed their benchmarks.

And in pretty much all cases, it seemed that adding a momentum tilt to your stock selection, improved performance.

Do you follow?

That means the truth is, like it or not, stocks in motion tend to stay in motion. And you’re better to wait for a turn than try to pick a bottom. At least, that’s what the data seemed to show.

A little more research confirmed the idea, or at least, suggested that it couldn’t hurt to try it. So over the last 15 months or so I’ve been tweaking, experimenting and trying to optimize with simple rules-based momentum filters.

But I know what you’re thinking.

Are we watching a value investor embracing technical analysis? Isn’t this against the rules?

Well, first and foremost, I’m a scientist. And it’s irrational to ignore the data. Especially when it contradicts your hypothesis.


Even if picking undervalued stocks makes me feel smart, doing it without any regard for momentum or price trend is arrogant and seems to lead to worse performance. I can’t ignore this fact. It’s irresponsible.

So here we are: in the church of technical analysis, apparently. Crazy, isn’t it?

But let me be clear: I’m not using indicators, voodoo or any other predictive methods to try and time the market. I’m only using price, with a side-dish of volatility to help manage risk.

And now that I’ve been doing this for some time, I’m happy to share the results.

The benefits of Millennial Investing:

To be clear, I haven’t used the Millennial Money criteria verbatim. But I’ve applied the spirit of the approach. Specifically: (1) I’m using price momentum as a filter, and (2) I’m rebalancing (buying and selling) based on explicit criteria rather than any discretion

You probably wouldn’t believe it…

But those two simple criteria have made my life much better. First and foremost, these two tenets have helped me avoid serious losing trades. In a time when energy was cratering and small caps were collapsing, this alone is worth adopting an approach like this (for me personally at least).

Along the same lines, when you have a rules-based approach to buying and selling, you spend much less time worrying about trading decisions and whether or not to bail on a stock. It’s like being your own personal ETF. Cool, right?

The flip side of the above is that you can actively manage your money, without worrying all the time. You’ll probably end up spending less time thinking about the markets. And the time you do spend will be used more productively on big picture system development, risk management or business development.

What’s not to love about that?

And by the way, in my small experiment over the lear year and a bit, the performance results have been better. So it’s not just peace-of-mind I’m after. The bottom-line results are real.

The truth is, as any behavioural economist will tell you, our brains aren’t well-wired for stock trading. We are impulsive, irrational and do the worst thing at the worst possible time.

While that’s easy theory to espouse, I think for me personally, putting this concept to practical test, I’m happy with the results. And it’s something I’ll continue to expand across my portfolios.

But I’m not losing sight of my value and quality foundation either. My universe of stock investment opportunities is still limited to only those which I deem to be worthy. Now, I’m just systematically picking the ones out of that pool with the best chance of continuing to appreciate in price.

So now it’s time to flip the script and ask you a question. Do you think you could use a rules-based approach to improve your investing and trading?

Either way, you might want to check out Millennial Money.