Investing In The Next Generation, Literally

For years, I’ve been both vexed and amazed by my kids. My exasperation and admiration often arise from the same source—technology. Simply put, they command it and I’m bedeviled by it. They are consummate millennials and move easily through the electronic environment, picking up gizmos and practices that save them time and trouble while they shop, conduct research and connect with others.

And why not? My next-gen progeny grew up in an age where most every home—including their own—was connected to the Web. They witnessed and contributed to the explosive growth in publicly traded online companies like Facebook, Google, eBay, and PayPal. Their contributions were first as consumers and later as investors. They’re now owners of these next-gen properties, mostly through their retirement plans: they and many of their cohorts.

Next-gen is more than just tech. Coffee, in all of its fashions and forms, figures highly in the Gen Y universe, boosting the bottom line of outfits like Starbucks. The next-gen lifestyle’s a busy one, creating a niche for takeaway food delivery from GrubHub. And visits to Planet Fitness help keep Gen Yers trim enough to slip into their Columbia Sportswear—all publicly traded firms.

You don’t have to be a millennial to invest like one. Nowadays, you can buy the whole Gen Y lifestyle in one transaction. You’ve heard about the Principal Millennials ETF (Nasdaq: GENY), haven’t you? It’s a portfolio of 106 global companies with substantial exposure to my kids’ spending habits. GENY’s been a good buy over the past year, handily outdoing the performance of broad market benchmarks, like the Nasdaq Composite, the S&P 500 and the MSCI All-Country World Index.

GENY tracks the Nasdaq Global Millennial Opportunity Index, which sorts its stock universe into concentration tiers based on a proprietary measure of sensitivity to Gen Y spending. Ultimately, the portfolio’s components are weighted by market capitalization and factor exposure, with a decided tilt toward quality. As a result, about 42 percent of the portfolio’s given over to technology and another 39 percent to the consumer discretionary sector.

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