When it Comes to Investing, Listen to the Kids
Note: This article also appeared in HumbleDollar.
One of the great pleasures of having grown children is seeing them doing things better than you ever did.
My son, who is in his mid-twenties, is already well beyond me in terms of investments. When I was his age, I was still bouncing around in grad school, living off teaching stipends while dreaming of one day being a novelist. I had no concept of what a mutual fund was, how to trade stocks and bonds, or even what a stock or bond was.
While I’ve always been good at managing and saving my money, when I was younger, I generally avoided anything having to do with finance and investments. I admit to even having a bit of a mental block about money at that age, seeing it as a necessary evil to “purer” pursuits as writing and literature. Yes, I had sugar-plum visions of having a million dollars in the bank that I could live off—who doesn’t?—but I had no idea how to accumulate it. All that came in my thirties and forties when I started working in the corporate world.
My son has none of that baggage. He’s been interested in investments since he got out of college four years ago. He discovered the F.I.R.E. (Financial Independence, Retire Early) movement early on and has set a goal of being able to be financially independent by the time he’s in his late forties.
I have no doubt that he’ll achieve that goal. He lives frugally and is investing a big chunk of his salary in a well-diversified basket of ETFs and mutual funds. He complements that core nest egg with some “fun money” that he invests in a handful of big-bet individual stocks that he’s passionate about. The idea, he tells me, is that if he’s right about those big bets, he’ll be able to get to his FIRE goal a little early. If not, he’ll still be on track toward his investment goals, while having a little fun along the way.
Research is an essential part of my son’s investment approach. He regularly reads The Economist, The Wall Street Journal, Reuters and other sophisticated financial outlets to get ideas on business and economic trends that might translate into investment opportunities. Then he researches the companies that are playing those trends and finds a way to invest in them.
Every couple weeks, he and I get on the phone and share investment ideas. Or rather, he shares the ideas and I listen. It was two years ago this month that he told me of an article he’d read in The Economist about the rapid advances being made by innovative startup companies in the area of biotechnology and messenger RNA (mRNA) technology. These novel ways of delivering therapies and vaccines were going to transform the pharmaceutical industry, he said. Then he gave me the names of two mRNA pioneers he was investing in.
“You should invest some money in these companies, Dad,” he said. “I think they’re going to be big.”
The companies’ names? You guessed it: Moderna and BioNTech.
Two months later, the global pandemic hit. Moderna and BioNTech were suddenly household names. Their stocks rocketed to the stratosphere. My son was able to pay off his car with his profits. I, being a fool, hadn’t listened to his advice and missed out.
Now, he readily admits to having been incredibly lucky with his timing in buying MRNA and BNTX two months before a once-in-a-generation pandemic changed the world. Not all of his investment picks have worked out as well as those first two, and overall, I suspect he’s probably doing just a little better than average, even with those two blockbuster picks.
Still, I find that his investment theses invariably make a lot of sense and are well-researched. He always brings a fresh perspective on things that I have not thought of, and he’s not afraid to challenge my thinking when I’m being stubborn, which happens from time to time.
I, for my part, am able to add good real-world perspective on the investment ideas, pulling from my background in corporate marketing and investor relations. It makes for a good combination.
Lately, we’ve been talking about special purpose acquisition companies (SPACs) and the use of options to protect investment gains. I’m not sure I’ll jump into either one of those two alternative vehicles, but I always learn from the things my son brings to our phone conversations, and that’s really the point—to keep on learning. I also find these conversations help me stay on top of what’s going on in the workplace, which is important now that I’m no longer in the workforce.
Let’s face it: while Baby Boomers control the vast majority of the wealth in our investment accounts, it is the younger generations—the Millennials, Gen Xers and Gen Yers—who are creating the investment opportunities of the future through their work and their day-to-day buying decisions. Best listen to what they are telling us.