Sean Hannon, now 34, has been investing since his mid-20s. As soon as he paid off his student loans, he redirected the money he had been putting towards those debt payments into the stock market. When he first started, he was drawn to trendy stocks like Amazon, which were shooting up during the Internet bubble. After losing about $10,000 that way, he switched to a more fundamental approach. He picked household names that he thought were undervalued, bought shares, and then sold them when they reached the price he thought was fair.
He became so successful that he started managing friends and family's money for them. Then, after working for large corporations including JP Morgan and Morgan Stanley, he started his own investment firm, Epic Advisors, based in Westfield, New Jersey. He now manages around $25 million in assets, and continues to invest his own money, too. For the most part, he still sticks with that fundamental approach, with some added diversification and risk-modeling thrown in.
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Hannon is unusual in that he started investing, outside retirement accounts, at such a young age. Sure, his background in finance helped. But he says any young person can benefit from putting some of their money into the stock market, although he tells his clients who can't take the volatility of individual stocks to stick with broader-based index funds. "If someone gets too stressed out with the ups and downs… then index funds are probably best," he says. But he says higher returns are possible for those willing to both stomach short-term losses and put the work into researching individual companies.
Jason Barnette, a 28-year-old software developer in Arlington, Virginia, also got started early, at age 21. "I felt like I needed to put my money somewhere where it had the potential to grow. I didn't need it for anything immediately," he says. So he opened up a brokerage account and started picking individual stocks, inspired by the writings of investing guru Peter Lynch, among others.
Over time, Barnette decided that shifting more of his money into index funds made the most sense, so now he has about half of his investments in individual stocks and half in index funds. "Before I probably thought I could purchase individual stocks and luck out and get better than market returns. But then you realize, it's a lot easier to just buy some of these indexes and balance things out evenly," he says.
Are you a 20, 30 or 40-something who also decided to start investing at an early age? Please share your lessons learned and advice for others below.
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Hannon recommends these resources for 20, 30 and 40-something investors looking to get started:
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Mike of MA 12:24AM September 13, 2009
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