My Son Just Started His First Job. Here's How I'm Teaching Him to Invest His 401(k) Money.

My 18-year-old son just started his first full-time job that offers a 401(k) plan. I helped him set up his investment choices. Different companies have different 401(k) plans with different investment options. Not every plan has every type of exchange-traded fund (ETF).

But I want to share the 401(k) investing strategy that I recommended to my son. I hope this can be helpful for other young people who are getting started with their careers and investing for retirement.

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1. Avoid fees: Buy low-cost index funds

Before you decide which exchange-traded funds (ETFs) to buy for your 401(k) or other workplace retirement plan, be sure to check the fees. Some of the funds in your company's retirement plan might charge surprisingly high fees -- such as expense ratios of 1% of your assets or more.

High fees like those can eat into your returns and cause you to miss out on tens of thousands, or hundreds of thousands, of dollars of future investment gains during your life. Instead of paying high fees on your 401(k) funds, look for low-cost index funds with low expense ratios of about 0.07% or less.

2. Diversify: Buy as many different stocks as possible

Some 401(k) plans might offer a total stock market index fund as part of the investment choices, while other plans might require you to "build your own." We took a "build your own" approach to creating a diversified stock portfolio for my son's 401(k).

I encouraged my son to buy an S&P 500 ETF, a mid-cap ETF, a small-cap ETF, and an international stock ETF. These four different stock ETFs collectively own thousands of stocks. They give broad exposure to the entire U.S. economy and to global markets outside the U.S. market.

3. Put 100% of your money into stocks (0% bonds for now)

My son is young and just getting started with his career. He has a long investing time horizon of perhaps 40 to 45 years before retirement. He can afford to accept some volatility and investment risk. For those reasons, I recommended that my son put 100% of his 401(k) contributions into stocks, with 0% in bonds. Even if there is a stock market downturn in the next few years, I believe stocks will outperform bonds over the next 40 to 45 years before my son reaches retirement age.

Not everyone might feel comfortable with such a stock-heavy allocation, and that's OK. Consider bumping up your percentage of bonds to 10%, 20%, or even a 60% stocks/40% bonds portfolio if that feels less risky. But if you're young, and you're truly a long-term investor who can afford to leave your 401(k) money alone to grow for the future, you might want to put as much money as possible into a diversified portfolio of stocks for maximum long-term growth.

Four stock ETFs I'd recommend for my child's 401(k)

Here are four stock ETFs that fit the goals and strategy that I recommended for my son's 401(k):

Data sources: iShares, State Street, Vanguard

Here's why I would recommend each of these low-cost index funds:

State Street SPDR Portfolio S&P 500 ETF (SPYM)

Use this low-cost S&P 500 ETF as a foundation of the portfolio. Owning the 500 largest publicly traded U.S. companies is almost always a good choice for long-term investors. The State Street SPDR Portfolio S&P 500 ETF (SPYM) holds all the same stocks as the popular State Street SPY ETF, but at a slightly lower expense ratio.

iShares Core S&P Mid-Cap ETF (IJH)

Buying the S&P 500 is a great start, but long-term investors should also diversify beyond the largest 500 stocks. This low-cost mid-cap ETF might own some fast-growing large caps of the future.

Vanguard Russell 2000 ETF (VTWO)

Along with the iShares mid-cap fund, it's a good idea for young investors to own some small-cap stocks. Some of these smaller companies are less profitable and might not succeed, but some will grow into household-name stocks. Sometimes small-cap stocks outperform the S&P 500.

iShares Core MSCI Total International Stock ETF (IXUS)

Not everyone believes in international diversification. Some investors argue that U.S. stocks are globally diversified enough for most American investors, because U.S. companies earn so much revenue from global markets. But I like the idea of owning lots of stocks from all over the world. Doing so could help your portfolio keep growing in case of a weaker dollar or slower economic growth in America.

These four stock ETFs own a combined 7,415 stocks representing a wide range of industries, company sizes, and countries. No one knows which stocks will do best in the future, but I believe long-term investors like my son (and other young people) will benefit from low-cost index funds and broad diversification.

Ben Gran has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, Ati, Everpure, Moog, Nvidia, Taiwan Semiconductor Manufacturing, and Twilio. The Motley Fool has a disclosure policy.