FREE NEWSLETTER
ONE OF THE GREAT pleasures of having grown children is seeing them do things better than you ever did.
My son, who’s in his mid-20s, 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 and 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 money, when I was younger, I generally avoided anything having to do with personal 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, such as writing and literature.
Yes, I had sugar-plum visions of having $1 million in the bank that I could live off. Who doesn’t? But I had no idea how to accumulate it. That came later, in my 30s and 40s, 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 FIRE (financial independence-retire early) movement early on, and has set a goal of being financially independent when he’s in his late 40s.
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 exchange-traded index funds 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 for 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 of weeks, he and I get on the phone and share investment ideas—or, rather, he shares 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 Moderna and BioNTech 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 two. 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 to things that I haven’t 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, can add a good real-world perspective on 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, but I always learn from the things my son brings to our phone conversations. That’s really the point—to keep 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 there.
Let’s face it: While baby boomers control the vast majority of the wealth in our investment accounts, it’s the younger generations—the millennials, Gen Xers and Gen Yers—who are creating the investment opportunities of the future through their work and day-to-day buying decisions. Best listen to what they’re telling us.
James Kerr led global communications, public relations and social media for a number of Fortune 500 technology firms before leaving the corporate world to pursue his passion for writing and storytelling. His book, “The Long Walk Home: How I Lost My Job as a Corporate Remora Fish and Rediscovered My Life’s Purpose,” is forthcoming in early 2022 from Blydyn Square Books. Check out his blog at PeaceableMan.com. His previous articles were Fit to Retire, Challenging Myself and Reclaiming My Life.
Want to receive our weekly newsletter? Sign up now. How about our daily alert about the site's latest posts? Join the list.
Regarding SPAC’s, have your read Why SPACs Are a Racket ?
Great content! Keep up the good work!
Our two kids (ages 22 & 27) have far more financial savvy than us at their age which is a quite satisfying financial accomplishment. They get the stock market, funds, cost efficiency, most-particularly the savings imperative, and tax advantaged plans.
When I was in my 20’s I had a similar approach. I was mostly invested in core index funds but tried my hand at investing in companies I thought had a chance to revolutionize their respective industries. Some were winners and some were losers, but it was abundantly clear that I was underperforming my index funds.
Now in our mid 30’s, my wife and I understand that the main factors which will allow us to retire as soon as possible are focusing on saving as much as possible (index funds which are mostly in tax-advantaged retirement accounts), monitoring our asset allocation, and living frugally.
I understand that even some experienced investors have some play money they invest in individual stocks. It’s fun for them and as you mention, won’t derail their retirement plans if they were to lose a big chunk of this play money. (though I’d recommend the free Investopedia Stock Simulator as a substitute)
But for someone young, investing with play money is a slippery slope, especially if they see big/early success with their stock picks and believe this outperformance will continue over the long term.
Well done to your son on his overall approach and his good picks. You make your own luck I guess. I’m still youngish but I too wish I had got into investing earlier. I had the same mental block you mention for a number of years. Could have hustled harder in university.