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An accidental letter to my 21-year old self

| April 11, 2018
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The kids get it...

Yesterday, I had the great fortune of helping a group of Georgia Tech undergrads with their presentation on Impact Investing. And while it may be cliche, they really are our future leaders. -- and I'm happy about that.  It was encouraging to see their enthusiasm for creating a better world through both philanthropy and investment. That enthusiasm is pretty darned infectious.

The students did a thorough and inspiring presentation, highlighted by a video on eyeglass innovator Warby Parker (linked here), and then they turned it over to me as the Guest Speaker. It was a long class period, and I had more time than I needed. The conversation shifted to the practical aspects of investing for those who are just starting out.  One student asked,   "What would you do if you were 21 years old and wanted to invest for impact and sustainability?"

I began by telling the questioner that, like Alcoholics Anonymous, the best advice can come from someone who has made the mistakes and experienced what you are experiencing. 

Upon further reflection, I realized that I was essentially giving advice to my 21-year old self.  (I didn't mess up all of these things, I promise.)

Dear 21-Year Old Self,

Please take these three principles to heart as you embark on your financial journey.  There are surely more, so I reserve the right to contact you again at a later date.

Principle 1:  SAVE. 

It's hard.  But what you do at the age of 21 is worth multiples of what you can accomplish is you start at 41.  And if your company has a 401(k) plan, jump on it.  Let the government subsidize your savings by letting you save with pre-tax dollars.  And if your company plan has a "match", where they add their money to yours...  well, that's free money!  And if you're not participating, I will come find you and talk some sense into you!

Principle 2:  TAKE RISKS.

Years ago, companies created "pension plans" for employees.  You worked for years, and when you retired, they paid you each month until you died. A great system!  The managers of that pension plan were professionals who knew that they needed to grow the money that the company was putting in.  And since you couldn't see it, they took lots of risks. 

You have fifty years until retirement.  And like the pension plan, you really can't touch it until retirement.  You're not a pension manager, but you need to learn to think like one.  Don't believe that "balancing" your portfolio between stocks, bonds and cash is the right answer.  It's not!  You will be adding to this account with each pay check.  Don't get too cute.  Just put it in the river and let the current carry it.

Principle 3:  WATCH YOUR BORROWING

Don't give in to the temptation to use your retirement plan assets for other purposes.  No one is going to replenish them for you when you take them out. Even borrowing from your plan is a no-no.  What seems like manageable debt in the good times quickly becomes a problem in the inevitable bad times.  

But what about investing for impact, you ask?  Build a solid foundation in the process, so that you will have assets to make an impact with!  (Then, look for solid index vehicles that keep your costs low while still investing in the best corporate citizens...  Not a perfect plan, but it's a good start.)

Maybe this young man didn't really want all of this advice. Maybe 20 students were offended by my forceful remarks and animated delivery. That's what you get when you ask someone to be the guest speaker...  ;)  And if one person listened, "gets their act together" and has a more prosperous future, then it will have been time well spent.

Sincerely,

Your Future Self

Question to the reader:  What would YOU add to this list?  What advice to this student investor?

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