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Investing in Next Gen Companies as a Next Gen Investor

We’re very excited to rollout out our Next Generation services as we move into the 2020’s.   Today, while avoiding a complete spoiler, we’ll give you a little preview of what we’re planning.  For this update, we’ll offer a compelling and timely suggestion to those young investors who are just getting started with their first investment accounts and want to participate in the global wave of Next Generation companies.  Next Gen investments for the Next-Gen of investors!  Feel free to pass this on to anyone (kids, friends, etc.) who is a younger investor.  They will thank you!

Stockpile.com, Robinhood.com and Betterment

                Clearly, these newer investment portals have done a great job catering to the younger investor who is looking for a low-cost platform to get started.  Robinhood was the original platform for zero commission trades.  They pride themselves as being the home of the frequent trader, the guy who uses margin, options or even wants to own bitcoin.  They are mobile ready and have a highly functioning app to get it all done right from your phone.  Stockpile.com also pioneered a compelling offer to younger investors with smaller account balances who couldn’t afford to buy ONE share of Amazon for instance, trading at $1762/ share.  Wait what?  Yes, there are now many stocks that have triple digit share prices and few like Amazon with four digits.  My son who is 18, worked all summer and made $3500.  Is he going to put it all into 2 shares of Amazon?  Of course not. Stockpile.com offers investors a way to own fractional shares of any company for a mere .99 cents per trade.  Good idea.  Finally, Betterment is the original robo advisor charging only .25%/ year for a passive asset allocation portfolio to a blend of diversified ETFs.   Interesting, but you can actually get this type of thing completely free from any number of on-line sources and don’t need to pay .25%.  None of these portals come with a relationship of any sort beyond a 1-800 number to call when you’re in trouble, need guidance, panicking about your investments or have an actual tough decision to make.  So, for what they do and what they offer, these newer portals certainly (did) offer something unique… until Charles Schwab beat them at their own game last week.  

Schwab, and all the other discount brokers like TD Ameritrade, Fidelity and now Merrill (this am) now offer zero commissions to trade equities and ETFs.  Goodbye Robin Hood.  Schwab now also offers fractional share ownership options also for free.   Good bye Stockpile.com.  And now you can find a passive asset allocation model built for your age and a few preferences in many on-line portals, again for free.  Goodbye Betterment (and Wealthfront).  The big boys have now completed the race to zero.  It’s all free as long as you don’t need help with anything, don’t need to talk to anyone, don’t ever want to, or need to change your investment allocations, don’t need help with taxes or tax strategy, don’t need a will, and are comfortable staying invested in all market conditions including bear markets of -40-50%.   


Honestly, there isn’t really a compelling advantage to any of these new investor portals anymore.   The larger discount brokerage shops like Schwab, TD and Fidelity all offer the same thing.  

So, let’s start with the standard that our Next Gen investor is going to open an account on a platform that offers a lot of free stuff.  Great idea.   Our clients are at Fidelity and they have it all!

Now, let’s move on to our Next Gen Investment portfolio

Next Gen Investment Portfolio

                Please note that this suggestion, not even a recommendation, is not based on any one’s individual risk tolerance, capacity for risk, income or stated objectives.  It’s really a suggestion based on current market risks and opportunities.  Logically, there is no portfolio of securities that offers a magic mix of stocks, bonds, commodities or anything specialized that is built for all market conditions.  Factually, there are long period of time, like 20-30 years when one asset class will either underperform or outperform expected returns of today.   So, our suggestion today is based only on market conditions today but designed for a younger investor under the age of 40, who is just starting out, making their first investments and has a longer time horizon.  At a very high level, we expect the total return on bonds to be small, we expect the total return on stocks to be below average for domestic and above average for internationals.  And finally, we expect commodities to start providing some diversification benefit to a portfolio but it’s very hard to quantify.  That’s as much information as anyone can offer and these are derived solely on probabilities based on current valuations relative to historic norms.

But here are a few great ideas for a Next Gen investor.

  1.  Adopt a core/ satellite approach to your portfolio.

The core is a standard diversified portfolio spread across multiple asset classes.   We would suggest this “core” piece represent about 70% of your total account value.  It will include domestic and international stock funds, bond funds and few commodity positions.

The “satellite” piece represents the remaining 30% and is going to be more volatile in term of price changes, effectively revolving around your core holdings.  These are going to be stock positions that capitalize on the Next Generation of leading companies across several sectors and industries.  Next Gen investors want to own a piece of what they view as the innovative, game changers, and disruptors.  Our current Next Gen investment satellite positions include ETFs that focus on social media, clean energy, cyber security, robotics, new payment systems, energy storage, blockchain technologies, artificial intelligence, etc.  

  1. There is no need to own individual stocks until you have significant money to invest.  

Jim Cramer from CNBC says that $100,000 is the minimum investment balance for an investor to become eligible to invest in individual names.  I would agree.

  1. There is no need to own fractional shares of anything

When I hear about fractional shares, it reminds of those old car dealer commercials.  “If you can’t afford it, then finance it!”.  When the world of high-profile stocks are commanding $1700/ share, you’re swimming in the deep end.  Furthermore, it takes a long time and many years of appreciation for any stock to rise to that price level.  Inherently, we know that high price stocks are priced high along with their valuations.   If we can’t afford them, we shouldn’t try to finance them by reaching for fractional shares.  Our focused group of free to trade ETFS is very affordable in the $/ share category and they own many of the same high-priced stocks under the hood, even in concentrated positions.  

  1.  Tax loss harvesting and rebalancing are really BS sales tactics

As we mentioned above, there is no fixed asset allocation mix that stands the test of time.  Companies like Betterment and others, offering passive fixed asset allocation mixes, work hard to convince you that tax loss harvesting, and rebalancing does a lot to improve your results and adapt to changing market conditions.  However, if you read the fine print, you’ll see that they admit that the effort yields only fractions of a percent in improvement in your returns over practically any time period. It’s really just a sales pitch.  Changing your investment mix by weighting and unweighting asset classes based on valuations, expected returns and current leadership, is much more meaningful to your portfolio results.  We do this for our clients in a tried and test method called Dynamic Asset Allocation.  Our Next Gen Investment strategy will follow the same process and discipline.   

  1.  Get started early

I can’t emphasize this enough.  If you choose to wait to make your first investment, start a retirement account, save for education for kids or a down payment on your house, the fewer choices you will have in the future.  Get started right now!  Save when it hurts! Put money away when you’re young and you can think of one thousand things you’d rather do with your earnings.

  1.  Do it with Tax Deferred/ Tax Free money

Putting on my financial planner hat now.  Here’s a great tip and trick to earn money, invest it and pay no taxes when you’re just starting out.

  • You do not have to file a tax return or pay taxes if you make less than $12,000/ yr.   For most young adults (teens).   You’re not going to make more than $12,000/ year.
  • You can legally contribute up to $6000 of your earned income to a Roth IRA annually.  If you are under 18, your parents can open a custodial Roth IRA for you, after 18, you can do it yourself in most states.


  • Roth IRA money grows tax free.  No catches, no restrictions.  Gains that are accrued over many many years can be withdrawn after age 59.5, tax free. This is the last free lunch, go get some.

In the new year, we’ll be formally rolling out our complete Next Gen package of services and investment options.  Primarily they are aimed at the children of our existing clients but will have a lot of attractive options for new younger family investors as well.  We look forward to working with the Next Generation of serious investors and will have comprehensive solutions for you including tax strategy, tax strategy, will development, planning and investments as a package offering.  This is just a teaser.  Please contact us if you would like a more detailed list of the Next Gen Investment portfolio securities.


Sam Jones

President, All Season Financial Advisors