Re: Kids and stock
AskAsa
6/27/2011 1:58:32 PM
Excellent point Tenacious. We have to expose our kids to the same ups and downs of investing that we already expose them to in other aspects of their lives.
Kids and stock
Tenacious
6/27/2011 1:17:05 PM
We encourage kids to play sports, pick up an musical instrument, perfect their creative talents. Then we balk at encouraging them to invest. Well, let's be realistic. Some kids have their egos bruised on the baseball field, and they get over it. So what's the big deal if they invest their birthday money in a stock that sputters? They may feel annoyed, but it's not the end of the world. We just have to teach them its ok to try, and encourage the ones who have an aptitude to stick with it.
I'm revisiting this post after a couple of days away and I think it is incredible--and incredibly wonderful--to see the amount of interest it has generated. Speaks well for us as interested "financial parents," I would say!
As the one who originally mentioned the concept of paper portfolios, I see that there are a number of folks who are intrigued by the idea, either like #erierunner from personal experience or because it sounds like a great way for a young investor to crawl before (s)he walks. Then there are those who feel that nothing can really be learned without plunging in, kind of the "take off the training wheels and risk a skinned knee" school of learning.
My opinion is that the two aren't necessarily mutually exclusive. I think excellent--and different--lessons can be learned from both, perhaps even at the same time. A paper portfolio provides a great conceptual introduction and provides for the study of lots of different types of stocks and, it goes without saying, that it provides for diversification that isn't possible with buying just one.
It also allows for a little sector research before a young investor needs to feel pressured to choose the ONE and ONLY first stock ever. Because remember--if that first purchase is a LOSER, it will be ALL YOUR FAULT, and it will be a cold day in Hell before (s)he will feel like betting the clothing allowance on another investment purchase!
On the other hand, at some point life does need to be lived without a safety net, and if there is an upside to be had, it's pretty fun to have it be an actual profit, not just a plus column on a spreadsheet.
Bottom line, as with so many parent/child decisions, I think it depends on the personality, interest level and maturity of your particular kid, and it's nice to have a number of lures in the tackle box to reel them in.
And you never know...I went to business school with a guy who swore on a stack of Bibles that he bought his first car as a teenager with his profits from trading frozen orange juice futures!
Mock protfolio
impactnow
6/21/2011 12:14:18 AM
While an investor may behave differently with a mock portfolio versus real life money it is a tool for learning. We all drove a car in drivers Ed differently than we do in the real world but it still helped us all get our license. A mock portfolio can help and individual get over their fear of investing and help them develop an approach and a methodology for investing. If it gets them thinking about their money and financial security as well as their risk tolerance and goals it’s worthwhile.
Re: A Mother's Advice
Broadway
6/20/2011 11:01:24 PM
I wish I would have had this opportunity when I was in high school...or earlier, when I was still really motivated to learn. Perhaps I did ... I'm from PA. Probably just didn't know about it. Anyway, I've learned little bits here and there over the years about investing. My father's famous bit of wisdom was: never touch your principle.
Re: A Mother's Advice
erierunner
6/20/2011 3:56:49 PM
Phoenix: The name of the organization is EconomicsPennsylvania. Website is www.economicspa.org. They have been around since the 70's doing the financial education. There are sister organizations all across the country. Not only do they have the stock market game but also business writing contests, grants, etc.
Honestly, that is the best straight-forward, in-your-face investment advice i have ever heard. Thank you so much for putting it ito terms that professionals and laymen can realte to. I will definitely utilize and pass this on (giving you all the credit, of course)!
Re: A Mother's Advice
Phoenix
6/20/2011 11:43:34 AM
Eirerunner it is great to hear that you teach students the value of investing through a stock portfolio game. Please do tell us more about it. The strategy game I mentioned is for young adults and it was done in class while I was still studying a long time ago. I still remember how interesting I found the whole decision making process and the excitement that went with it. So I think it really is an effective teaching method. There was a lot of emotions involved as well since we had to compete with the other teams.
However, I agree with value hiker that investing in the markets with actual money is some what different to the emotions experienced in class. I guess we've grown up and our thinking patterns are also different to what they were while we were in class.
Teach your children.
AskAsa
6/20/2011 10:53:35 AM
Noreen you bring the art of parental financial advice to a whole new level.
My own saintly mother limited her own wisdom to one pearl.
"Once you've got a dollar in your pocket - you can tell them all to go to hell."
Good advice - but not nearly as sophisticated as the info in your column.
I thank you and I know my children thank you.
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