Ten Investing Ideas for Millennials

Investing ideas for millennials. That could be a long conversation.

And I tried to prove it while speaking to one of my millennial sons (more like “at my millennial son”) about investing ideas for millennials. My painful explanations bounced between the nuances of ETF secondary trading and those of central bank interventions.

Much of my speech was directed at the volatility of investment returns and the unknowability of stock, bond, and house prices. These were not simple concepts.

Perhaps most importantly, I was relieved to discover that he had already met with a licensed financial advisor and a CPA.

With that wave of relief, my explanations continued to expand. I suddenly realized that this was taking a long time.

My son was either a fantastic listener or he had tuned out long ago.

So, I vowed to myself that I would just write him an email and share the one-minute version with him.

I did that the next day.

shadow of father and son watching sunset and discussing long-term investing

The Email to My Millennial Son

I began the email, suggesting that my son owed it to himself to learn the basics of investing money for the long term.

I also suggested that he learn the basic concepts of ETFs. Read the homework.

Most importantly, the one-minute version of my speech followed.

Ten Investing Ideas for Millennials

1) Pay off your debt first.

2) Reduce current taxes and defer them with retirement fund contributions.

3) Don’t try to time the stock, bond or housing markets.

4) If you put money in a retirement fund, invest half in diversified stock ETFs and mutual funds. Invest half in short duration bonds or bond ETFs and mutual funds (5-year duration is good). Short duration bonds reduce volatility.

5) High-yield ETFs (often called junk bond funds) are not your friend when interest rates are at historic lows (i.e. in 2017).

6) The increased popularity and direct trading of ETFs dwarfs the resulting increase in trading of the underlying stocks and bonds. Any prolonged surge of ETF selling may not be absorbed by the stock and bond markets. It’s hard to hide from that outcome. Actively managed mutual funds may help you avoid some of the downside in a bear market.

7) Be prepared for your stock portfolio to fluctuate significantly. You will need to be able to accept a 50% loss in your stock portfolio while overcoming your natural, but misguided, instinct to sell at any price.

8) At your young age, dollar-cost averaging is your friend. You need to systematically invest in stocks across many years to gain the benefit. Stick with your dollar-cost averaging plan even when your stocks are 50% down.

9) Interest rates are at all-time lows. At this point, interest rates can only rise. This means that bond, stock and house prices will fall. On the other hand, central banks will not permit significant interest rate increases because of the devastating blow that such increases will have on heavily indebted governments and consumers.

10) Learn the basics of investing for the long-term and seek the advice of licensed financial advisors and CPAs. Check their credentials. Listen to their advice, then decide how you want to invest.

11) And don’t forget to enjoy life one day at a time. Love, Dad

I hope my son thought the one-minute version was important too.