Money management tips for the Y-generation of the highly ranked Jeff Erdmann

In the United States, the leading wealth manager believes that a few simple pointers can help millennials and other young investors avoid major mistakes by deciding what to do with their money.

Jeff Erdmann of Merrill Lynch's private banking and investment group tops Forbes' list of Best Wealth Managers in America for the third year in a row, based on factors such as his experience and earnings generates for its customers.

The Erdmann team manages $ 10.5 billion for very wealthy families, most of whom include current or former founders and presidents and directors. It invests alongside its clients and focuses particularly on the very long term.

Here is additional context regarding the types of heavy hitters that rely on Erdmann's expertise: he needs a minimum count of $ 2.5 million and households that It represents typically invest about $ 35 million.

Thus, although very few Generation Y and Generation Z members have attained this status, Erdmann says these young investors can learn a lot from the techniques he uses for his ultra-wealthy clients. . In fact, he says that an ideal starting point is to identify the types of behaviors to avoid.

In an exclusive interview with Business Insider, Ermann badyzed the three mistakes that millennial investors should avoid at all costs. And as a bonus, he exposed the approach that he uses with the youngest clients.

Mistake 1: Take big risks right now

Erdmann explains that some young investors feel that they have to take big risks because they start with relatively little money and want to be able to pay for a wedding or a house in the near future.

In his mind, these investors have the situation back. He says their smaller initial investments put them in a vulnerable position to absorb huge losses.

"(Being young) does not mean that you become more aggressive and that you are trading and coming back to the market and speculating on a particular product or strategy of options," he said. "You can not afford to lose your money."

What young investors should do instead:

Erdmann explains that new investors do not need to play because they have the benefit of time. He says that they should invest in growth badets, but without making huge doubtful bets.

Error 2: Squeezing Robots

Erdmann praises some of the changes brought by investment advisers to the world of investing, such as reducing fees and simplifying for people regularly investing their money. But he says that ultra-easy trading can encourage investors to do the wrong thing at the worst time.

"The main risk for investors is their emotions," he said. "You can pick up your phone, press a button and enter or exit the market.The biggest mistakes that investors have made during the course of history are this type of actions."

What young investors should do instead:

Erdmann recommends millennia to separate their emotions from their investment decisions, think long term and find a counselor who can help them achieve their goals. He notes that some robo-counselors offer clients the opportunity to contact people for advice, but many do not take advantage of this opportunity.

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Error 3: Chasing old trends

It is natural that a new investor wants to embark on a popular strategy that has worked recently.

"What many new and young investors are doing is that they often continue the trend that has been hot in the last 3, 5 or 10 years," he said. "I have not yet seen a 10 year trend being the big trend for the next 10 years."

Erdmann uses indexing as an example. This tactic was extremely successful during the bull market and an investor who had put his money in a fund that watched the S & P 500 index ten years ago and left it alone would have benefited from extraordinary returns . But over the previous decade, the index has dropped significantly.

What young investors should do instead:

Erdmann said investors should understand that a highly publicized trend will not continue indefinitely. He says that they should instead adopt more of an investment strategy, so as not to rely on a specific stock, region or method to generate the desired returns.

Bonus: Erdmann's approach to young customers

In addition to staying informed and trying to keep fees and taxes low, Erdmann said he recommended a three-part strategy for new investors once they had opted for a trading strategy.

1. Invest about a third of their money right away.
2. Invest gradually the next third over the next six to 18 months. This "average cost calculation" technique refers to the number of people who invest in employer-sponsored 401 (k) pension plans.
3. Use the remaining third to take advantage of market declines, buying when badets are very cheap.