It's fascinating to get your kids involved in investing

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
GoldenGoose
Posts: 329
Joined: Tue Jan 30, 2018 2:08 pm

It's fascinating to get your kids involved in investing

Post by GoldenGoose »

This is to share my experience and not asking for help.

My kids through the years amass about $2k from gifts and stuff. They keep the cash and from time to time mention the fact that they have that much money. So I ask them to give me the money so I can open an account and let them invest. At first they are reluctant. So to tempt them, I show them my investment account. Seeing what kind of gains I have, they relent and let me have the money. So we open an account and buy stocks from 4 companies in approximate equal amounts. Within the first week, they have a $100 gain. They are so excited and want to look around the house for more money to invest. Today they experience their first retreat (still gain, but less than before) so they get worried. I assure them of the prospect of long term gain.

Seeing them going through the roller coaster of emotion in investing remind me of myself many years ago. Cute. :)
burritoLover
Posts: 328
Joined: Sun Jul 05, 2020 12:13 pm

Re: It's fascinating to get your kids involved in investing

Post by burritoLover »

Have you explained to them that they can potentially lose all their money?
"Your money is like a bar of soap. The more you handle it, the less you’ll have." - Gene Fama
User avatar
Cam894
Posts: 30
Joined: Mon Jun 08, 2020 10:08 pm

Re: It's fascinating to get your kids involved in investing

Post by Cam894 »

GoldenGoose wrote: Wed Sep 02, 2020 2:50 pm This is to share my experience and not asking for help.

My kids through the years amass about $2k from gifts and stuff. They keep the cash and from time to time mention the fact that they have that much money. So I ask them to give me the money so I can open an account and let them invest. At first they are reluctant. So to tempt them, I show them my investment account. Seeing what kind of gains I have, they relent and let me have the money. So we open an account and buy stocks from 4 companies in approximate equal amounts. Within the first week, they have a $100 gain. They are so excited and want to look around the house for more money to invest. Today they experience their first retreat (still gain, but less than before) so they get worried. I assure them of the prospect of long term gain.

Seeing them going through the roller coaster of emotion in investing remind me of myself many years ago. Cute. :)
I see they have already been swindled by a hot shot money manager promising them the world. :D
User avatar
dratkinson
Posts: 5039
Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: It's fascinating to get your kids involved in investing

Post by dratkinson »

Should one of their investments be in a total stock market index fund/ETF? So they can compare stockpicking to total market investing.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.
pkcrafter
Posts: 14343
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: It's fascinating to get your kids involved in investing

Post by pkcrafter »

GoldenGoose wrote: Wed Sep 02, 2020 2:50 pm This is to share my experience and not asking for help.

My kids through the years amass about $2k from gifts and stuff. They keep the cash and from time to time mention the fact that they have that much money. So I ask them to give me the money so I can open an account and let them invest. At first they are reluctant. So to tempt them, I show them my investment account. Seeing what kind of gains I have, they relent and let me have the money.

So we open an account and buy stocks from 4 companies in approximate equal amounts
:confused
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Grt2bOutdoors
Posts: 23060
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: It's fascinating to get your kids involved in investing

Post by Grt2bOutdoors »

pkcrafter wrote: Wed Sep 02, 2020 6:49 pm
GoldenGoose wrote: Wed Sep 02, 2020 2:50 pm This is to share my experience and not asking for help.

My kids through the years amass about $2k from gifts and stuff. They keep the cash and from time to time mention the fact that they have that much money. So I ask them to give me the money so I can open an account and let them invest. At first they are reluctant. So to tempt them, I show them my investment account. Seeing what kind of gains I have, they relent and let me have the money.

So we open an account and buy stocks from 4 companies in approximate equal amounts
:confused
Not so confused here. At that age kids know individual companies not indexes.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
pkcrafter
Posts: 14343
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: It's fascinating to get your kids involved in investing

Post by pkcrafter »

Grt2bOutdoors wrote: Wed Sep 02, 2020 6:52 pm
pkcrafter wrote: Wed Sep 02, 2020 6:49 pm
GoldenGoose wrote: Wed Sep 02, 2020 2:50 pm This is to share my experience and not asking for help.

My kids through the years amass about $2k from gifts and stuff. They keep the cash and from time to time mention the fact that they have that much money. So I ask them to give me the money so I can open an account and let them invest. At first they are reluctant. So to tempt them, I show them my investment account. Seeing what kind of gains I have, they relent and let me have the money.

So we open an account and buy stocks from 4 companies in approximate equal amounts
:confused
Not so confused here. At that age kids know individual companies not indexes.
Well this is the Bogleheads forum, so if the OP wants to teach children about investing, why not do it do it right from the start?

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
KlangFool
Posts: 17865
Joined: Sat Oct 11, 2008 12:35 pm

Re: It's fascinating to get your kids involved in investing

Post by KlangFool »

OP,

My kids received A few hundred to one thousand every year. They get to spend it and let me invest the remainder for them.

I put their money into the Vanguard Life Strategy Growth Fund (80/20).

https://investor.vanguard.com/mutual-fu ... file/VASGX

When they were old enough, I gave the money back to them and they opened their own Vanguard account and invested in the same fund.


When they were old enough and worked in Summer, they opened Roth IRAs and invested in Vanguard LifeStrategy Moderate Growth Fund (60/40).

They graduated college with 20K to 30K of investment in the Vanguard LifeStrategy Growth and Moderate Growth Fund.

They learned that as long as they saved and invested, the money will grow. Investing is boring.


KlangFool
User avatar
F150HD
Posts: 3212
Joined: Fri Sep 18, 2015 7:49 pm

Re: It's fascinating to get your kids involved in investing

Post by F150HD »

I show them my investment account.
Kids talk. surely all their friends (and family) will then eventually know your financial status. To me thats uncomfortable. In areas I've lived, that can also make one a target for a break in. Sad but true.

Age of kids is not stated. Alas, its not a choice I would personally have made.

Good luck.
redstar
Posts: 97
Joined: Thu Jul 13, 2017 11:15 pm

Re: It's fascinating to get your kids involved in investing

Post by redstar »

I feel like the time horizon most of us are looking for in long term investments just don't fit what many kids imagine spending their money on. As a kid, anything longer than a few months to a year felt like it was an eternity away.
oldfatguy
Posts: 649
Joined: Tue Feb 27, 2018 1:38 pm

Re: It's fascinating to get your kids involved in investing

Post by oldfatguy »

It's never made sense to me for those who cannot even support themselves (kids in this case) to invest money. It's detached from reality. What is supposed to be teaching them?
User avatar
arcticpineapplecorp.
Posts: 6222
Joined: Tue Mar 06, 2012 9:22 pm

Re: It's fascinating to get your kids involved in investing

Post by arcticpineapplecorp. »

GoldenGoose wrote: Wed Sep 02, 2020 2:50 pm Today they experience their first retreat (still gain, but less than before) so they get worried. I assure them of the prospect of long term gain.
not with 4 individual stocks you don't.

it's a shame they had to experience their first retreat today.

the market went up today, not down.

that's one lesson they're not learning your way.

the other lesson they're not learning is what William Sharpe once said (you'll like this. It's called the Golden Rule of Investing":
Just like the most important thing about real estate is location, location, location...the most important thing about investing is diversification, diversification, diversification. And if you need another it's keep costs low, keep costs low. keep costs low.

source: https://www.youtube.com/watch?v=SXab7pFUfjY
I know you weren't looking for help, but that doesn't mean you're not going to be offered it.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
invest4
Posts: 228
Joined: Wed Apr 24, 2019 2:19 am

Re: It's fascinating to get your kids involved in investing

Post by invest4 »

We frequently discuss personal finance and investing topics with our children. However. It was only after they have begun working where the exchanges are more mature and I share more about our own portfolio and approach and open a Roth IRA for them if interested.

I discuss what choices are available to people and share my own journey including my failures which eventually led me to adopt boglehead principles.

One of my daughters is a saver and keenly interested. During the pandemic in March, she added $1000 to her Roth, but only invested $500 immediately as she felt the market would plunge further. The money is still there in cash and it has been a great learning experience for both of us to see and feel the results of her decisions and how it shapes her investing approach.

As a side note, she has a 3 fund setup of VTI / VXUS and BND so she can also better understand how they behave and work together.
Grt2bOutdoors
Posts: 23060
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: It's fascinating to get your kids involved in investing

Post by Grt2bOutdoors »

pkcrafter wrote: Wed Sep 02, 2020 7:42 pm
Grt2bOutdoors wrote: Wed Sep 02, 2020 6:52 pm
pkcrafter wrote: Wed Sep 02, 2020 6:49 pm
GoldenGoose wrote: Wed Sep 02, 2020 2:50 pm This is to share my experience and not asking for help.

My kids through the years amass about $2k from gifts and stuff. They keep the cash and from time to time mention the fact that they have that much money. So I ask them to give me the money so I can open an account and let them invest. At first they are reluctant. So to tempt them, I show them my investment account. Seeing what kind of gains I have, they relent and let me have the money.

So we open an account and buy stocks from 4 companies in approximate equal amounts
:confused
Not so confused here. At that age kids know individual companies not indexes.
Well this is the Bogleheads forum, so if the OP wants to teach children about investing, why not do it do it right from the start?

Paul
Oh come on, he’s doing it right. First it’s likely the 4 companies are in the index, second the next step is to say to the kids “owning 4 companies is great but how would you like to own a share of 500 companies or 3,482 companies”! See where this is going Paul? Baby steps!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Impatience
Posts: 183
Joined: Thu Jul 23, 2020 3:15 pm

Re: It's fascinating to get your kids involved in investing

Post by Impatience »

Learning individual stocks first makes sense. After all they’re the building blocks of everything else. What shocks me is that they even saved up that much. Most cash I ever saved before I was old enough to work was about $200. I was a fiend for every new video game.
pkcrafter
Posts: 14343
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: It's fascinating to get your kids involved in investing

Post by pkcrafter »

Grt2bOutdoors wrote: Wed Sep 02, 2020 10:06 pm
pkcrafter wrote: Wed Sep 02, 2020 7:42 pm
Grt2bOutdoors wrote: Wed Sep 02, 2020 6:52 pm
pkcrafter wrote: Wed Sep 02, 2020 6:49 pm
GoldenGoose wrote: Wed Sep 02, 2020 2:50 pm This is to share my experience and not asking for help.

My kids through the years amass about $2k from gifts and stuff. They keep the cash and from time to time mention the fact that they have that much money. So I ask them to give me the money so I can open an account and let them invest. At first they are reluctant. So to tempt them, I show them my investment account. Seeing what kind of gains I have, they relent and let me have the money.

So we open an account and buy stocks from 4 companies in approximate equal amounts
:confused
Not so confused here. At that age kids know individual companies not indexes.
Well this is the Bogleheads forum, so if the OP wants to teach children about investing, why not do it do it right from the start?

Paul
Oh come on, he’s doing it right. First it’s likely the 4 companies are in the index, second the next step is to say to the kids “owning 4 companies is great but how would you like to own a share of 500 companies or 3,482 companies”! See where this is going Paul? Baby steps!
hmmm, Ok, baby steps, but maybe in the wrong direction?


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Money_Badger
Posts: 45
Joined: Thu Jul 02, 2020 11:05 pm
Location: Raleigh NC

Re: It's fascinating to get your kids involved in investing

Post by Money_Badger »

KlangFool wrote: Wed Sep 02, 2020 8:06 pm OP,

My kids received A few hundred to one thousand every year. They get to spend it and let me invest the remainder for them.

I put their money into the Vanguard Life Strategy Growth Fund (80/20).

https://investor.vanguard.com/mutual-fu ... file/VASGX

When they were old enough, I gave the money back to them and they opened their own Vanguard account and invested in the same fund.


When they were old enough and worked in Summer, they opened Roth IRAs and invested in Vanguard LifeStrategy Moderate Growth Fund (60/40).

They graduated college with 20K to 30K of investment in the Vanguard LifeStrategy Growth and Moderate Growth Fund.

They learned that as long as they saved and invested, the money will grow. Investing is boring.


KlangFool
Investing is boring. Indeed, if done the right way :). Kudos to you! My daughter is 8, a bit young for this and we put half of her gift money in her 529, but I do intend to model/adapt this for us!
Topic Author
GoldenGoose
Posts: 329
Joined: Tue Jan 30, 2018 2:08 pm

Re: It's fascinating to get your kids involved in investing

Post by GoldenGoose »

It doesnt make sense for them to invest in ETF at this point. When they asked what companies should they buy, I told them to look around to see what products they are using. My son just bought a pc so I asked them what were in the pc. My daughter is using an iphone. So immediately they knew what to buy. Instead of just blindly buyingb I also asking them questions about those companies and informing them of the current events related to those companies. So it is more of a training excercise then trying to make money (secondary objective).
Topic Author
GoldenGoose
Posts: 329
Joined: Tue Jan 30, 2018 2:08 pm

Re: It's fascinating to get your kids involved in investing

Post by GoldenGoose »

Btw my kids are 12 and 9. The older boy has been always wanting to spend his money on his wants. After seeing how he could grow his balance, he asked about getting a job to put in the account.
Topic Author
GoldenGoose
Posts: 329
Joined: Tue Jan 30, 2018 2:08 pm

Re: It's fascinating to get your kids involved in investing

Post by GoldenGoose »

If you merely talk finance to themb, kids are mot interested. But if they have skins in the game, they would be really attentive.
Topic Author
GoldenGoose
Posts: 329
Joined: Tue Jan 30, 2018 2:08 pm

Re: It's fascinating to get your kids involved in investing

Post by GoldenGoose »

Also apple is one of the holdings. We bought it before the split. When I told my son about apple splitting 4 for 1 his eyes popped thinking he would get 4x the money. So I used the opportunity to explain stock split to him. Now he knows.
britcoal
Posts: 14
Joined: Fri Mar 14, 2014 5:45 pm

Re: It's fascinating to get your kids involved in investing

Post by britcoal »

I had an early interest by myself but it helped that I was 8~10yrs old watching my dad watch The MacNeil/Lehrer NewsHour every night. By 12 I had interest and my dad wasn't pushy about teaching but hid nothing about his investments, especially the failures. By the time I hit college I was ready to dive in and started with Fidelity Small and Mid cap mutual funds. 8 years later I was moving to index funds. It's been a very interesting and illuminating ride but I definitely owe 90% of my achievements/progress in retirement saving to my father's input/education when I was in my formative years.

Cheers to dad! :sharebeer
helloeveryone
Posts: 590
Joined: Sun Sep 04, 2016 5:16 pm

Re: It's fascinating to get your kids involved in investing

Post by helloeveryone »

Grt2bOutdoors wrote: Wed Sep 02, 2020 10:06 pm
pkcrafter wrote: Wed Sep 02, 2020 7:42 pm
Grt2bOutdoors wrote: Wed Sep 02, 2020 6:52 pm
pkcrafter wrote: Wed Sep 02, 2020 6:49 pm
GoldenGoose wrote: Wed Sep 02, 2020 2:50 pm This is to share my experience and not asking for help.

My kids through the years amass about $2k from gifts and stuff. They keep the cash and from time to time mention the fact that they have that much money. So I ask them to give me the money so I can open an account and let them invest. At first they are reluctant. So to tempt them, I show them my investment account. Seeing what kind of gains I have, they relent and let me have the money.

So we open an account and buy stocks from 4 companies in approximate equal amounts
:confused
Not so confused here. At that age kids know individual companies not indexes.
Well this is the Bogleheads forum, so if the OP wants to teach children about investing, why not do it do it right from the start?

Paul
Oh come on, he’s doing it right. First it’s likely the 4 companies are in the index, second the next step is to say to the kids “owning 4 companies is great but how would you like to own a share of 500 companies or 3,482 companies”! See where this is going Paul? Baby steps!
ha ha. I do like this lesson.
medic
Posts: 119
Joined: Thu Jul 18, 2019 11:30 am

Re: It's fascinating to get your kids involved in investing

Post by medic »

F150HD wrote: Wed Sep 02, 2020 8:42 pm
I show them my investment account.
Kids talk. surely all their friends (and family) will then eventually know your financial status. To me thats uncomfortable. In areas I've lived, that can also make one a target for a break in. Sad but true.

Age of kids is not stated. Alas, its not a choice I would personally have made.

Good luck.
We're totally open with finances in our home. Money should not be a taboo subject (along with several other topics). This makes it easier for them to feel comfortable to ask questions and it gives a chance to share one of my interests with them. It also helps them see the tradeoff in decisions we make. Yes, we can do X, but we choose not to so we can do Y and Z instead. It lets us demonstrate priorities, values, etc. When you see them applying similar logic at the toy isle in Target deciding how/if they want to spend their money, it's a good feeling.

Moreover, it gives our kids a chance to understand our life and the opportunities they have is not typical. The latter is even more important to us because kids frankly live in a bubble. I recall a teenage son of one of our execs suggesting to our admin that she buy a Porsche Macan ("I drive it, it's a great car") - the car was worth more than the admin makes in a year, but kid had no concept of what most people in the US or moreso the rest of the world experience.

Having done this open kimono approach since they were young, our kids have been in indexes from the start. They asked what these sets of letters were on the computer screen which gave a chance to talk about individual stocks vs indexes. Our kindergartener got that concept pretty quickly though saying you "own" Microsoft does need a bit of 5 year old explanation.
Topic Author
GoldenGoose
Posts: 329
Joined: Tue Jan 30, 2018 2:08 pm

Re: It's fascinating to get your kids involved in investing

Post by GoldenGoose »

Impatience wrote: Wed Sep 02, 2020 10:14 pm Learning individual stocks first makes sense. After all they’re the building blocks of everything else. What shocks me is that they even saved up that much. Most cash I ever saved before I was old enough to work was about $200. I was a fiend for every new video game.
Right, buying individual stocks in my kids' situation is correct, unlike other people's suggestion here about buying indexes. Kids relate better with names like "Apple" or "Microsoft" than "VDOO100" (put a fund's name here). But surely the concept will broadened to include EFTs in the future.
Topic Author
GoldenGoose
Posts: 329
Joined: Tue Jan 30, 2018 2:08 pm

Re: It's fascinating to get your kids involved in investing

Post by GoldenGoose »

arcticpineapplecorp. wrote: Wed Sep 02, 2020 8:52 pm
GoldenGoose wrote: Wed Sep 02, 2020 2:50 pm Today they experience their first retreat (still gain, but less than before) so they get worried. I assure them of the prospect of long term gain.
not with 4 individual stocks you don't.

it's a shame they had to experience their first retreat today.

the market went up today, not down.
This comment is short sighted. The market goes up doesn't mean your investment has to go up and vice versa.
petulant
Posts: 1901
Joined: Thu Sep 22, 2016 1:09 pm

Re: It's fascinating to get your kids involved in investing

Post by petulant »

I bought small amounts of stocks, competed in stock picking contests, and read Intelligent Investor as a teenager. Eventually I came to understand the powerful arguments behind indexing. It's a better education to see something about picking a few companies when it doesn't matter, then to build on top of that with indexing. Just telling kids to put money in the black box of the index because that's the correct way to do it from the start is how we get people blindly following traditions. OP's lessons are excellent and appropriate for a 12 and 9 year old, teaching them the value of work and saving. My two cents.
User avatar
SmileyFace
Posts: 5761
Joined: Wed Feb 19, 2014 10:11 am

Re: It's fascinating to get your kids involved in investing

Post by SmileyFace »

All I can say is you are lucky you did this during a climbing market. They probably would have hated you if they would have immediately lost $100 or $500 instead of getting a gain. I would say you got lucky. I am not sure how old your kids are - but I wouldn't encourage investing until they are late teens. For younger kids with savings - a bank account - even with today's low rates - is the best way for them to see compound interest work.
Topic Author
GoldenGoose
Posts: 329
Joined: Tue Jan 30, 2018 2:08 pm

Re: It's fascinating to get your kids involved in investing

Post by GoldenGoose »

DaftInvestor wrote: Thu Sep 03, 2020 7:59 am All I can say is you are lucky you did this during a climbing market. They probably would have hated you if they would have immediately lost $100 or $500 instead of getting a gain. I would say you got lucky. I am not sure how old your kids are - but I wouldn't encourage investing until they are late teens. For younger kids with savings - a bank account - even with today's low rates - is the best way for them to see compound interest work.
There that dreaded word again, "lucky". Gosh, why does this community is so obsessed with this word? If you did great, you're lucky. If you didn't do as great, are you unlucky?
User avatar
arcticpineapplecorp.
Posts: 6222
Joined: Tue Mar 06, 2012 9:22 pm

Re: It's fascinating to get your kids involved in investing

Post by arcticpineapplecorp. »

GoldenGoose wrote: Thu Sep 03, 2020 7:39 am
arcticpineapplecorp. wrote: Wed Sep 02, 2020 8:52 pm
GoldenGoose wrote: Wed Sep 02, 2020 2:50 pm Today they experience their first retreat (still gain, but less than before) so they get worried. I assure them of the prospect of long term gain.
not with 4 individual stocks you don't.

it's a shame they had to experience their first retreat today.

the market went up today, not down.
This comment is short sighted. The market goes up doesn't mean your investment has to go up and vice versa.
investing in 4 individual stocks is short sighted because they could go to $0, which the stock market won't.

Even if those 4 stocks don't go to $0 your active strategy is poorly diversified and will likely underperform. That's not me saying that, it's Professor Bessembinder:
“The results also help to explain why active strategies, which tend to be poorly diversified, most often underperform,” says Bessembinder, who found that the largest returns come from very few stocks overall — just 86 stocks have accounted for $16 trillion in wealth creation, half of the stock market total, over the past 90 years. All of the wealth creation can be attributed to the thousand top-performing stocks, while the remaining 96 percent of stocks collectively matched one-month T-bills.

source: https://wpcarey.asu.edu/department-fina ... sury-bills
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
Topic Author
GoldenGoose
Posts: 329
Joined: Tue Jan 30, 2018 2:08 pm

Re: It's fascinating to get your kids involved in investing

Post by GoldenGoose »

arcticpineapplecorp. wrote: Thu Sep 03, 2020 10:16 am
GoldenGoose wrote: Thu Sep 03, 2020 7:39 am
arcticpineapplecorp. wrote: Wed Sep 02, 2020 8:52 pm
GoldenGoose wrote: Wed Sep 02, 2020 2:50 pm Today they experience their first retreat (still gain, but less than before) so they get worried. I assure them of the prospect of long term gain.
not with 4 individual stocks you don't.

it's a shame they had to experience their first retreat today.

the market went up today, not down.
This comment is short sighted. The market goes up doesn't mean your investment has to go up and vice versa.
investing in 4 individual stocks is short sighted because they could go to $0, which the stock market won't.

Even if those 4 stocks don't go to $0 your active strategy is poorly diversified and will likely underperform. That's not me saying that, it's Professor Bessembinder:
“The results also help to explain why active strategies, which tend to be poorly diversified, most often underperform,” says Bessembinder, who found that the largest returns come from very few stocks overall — just 86 stocks have accounted for $16 trillion in wealth creation, half of the stock market total, over the past 90 years. All of the wealth creation can be attributed to the thousand top-performing stocks, while the remaining 96 percent of stocks collectively matched one-month T-bills.

source: https://wpcarey.asu.edu/department-fina ... sury-bills
You lost sight of the fact that this is a training exercise to get the kids familiar with investing and not a family's egg basket on the line. If they happen to lose all $2000, which is unlikely, but if they learn good lessons, then it's very well worth it to prepare them for their future, don't you think?
Notsobad
Posts: 77
Joined: Sat Sep 02, 2017 6:16 am

Re: It's fascinating to get your kids involved in investing

Post by Notsobad »

I agree with Paul. The best investment strategy is to get beyond the emotions of fear and greed, which is what feeds individual stock picking over indexing. Plus testosterone and hubris.

My Teenage kids Accumulated gifts overs the years. (A few thousand) We opened UTMA accounts and put about 90% in index funds. My son promptly bought Apple with the remaining 10% and follows it regularly. My daughter had no interest in individual stocks and we added the remainder into the index mix.

They were old enough to understand that owning all of the market was easier than picking the “right” few stocks and that they likely would beat over 90% of investors in the long run. (Stock pickers and market timers)
flaccidsteele
Posts: 1033
Joined: Sun Jul 28, 2019 9:42 pm
Location: Canada

Re: It's fascinating to get your kids involved in investing

Post by flaccidsteele »

GoldenGoose wrote: Wed Sep 02, 2020 2:50 pm This is to share my experience and not asking for help.

My kids through the years amass about $2k from gifts and stuff. They keep the cash and from time to time mention the fact that they have that much money. So I ask them to give me the money so I can open an account and let them invest. At first they are reluctant. So to tempt them, I show them my investment account. Seeing what kind of gains I have, they relent and let me have the money. So we open an account and buy stocks from 4 companies in approximate equal amounts. Within the first week, they have a $100 gain. They are so excited and want to look around the house for more money to invest. Today they experience their first retreat (still gain, but less than before) so they get worried. I assure them of the prospect of long term gain.

Seeing them going through the roller coaster of emotion in investing remind me of myself many years ago. Cute. :)
This reads like training kids the dangers of investing in individual stocks

It’s a good lesson to learn early for sure

It’s also good for them to experience the emotions so they can learn to ignore them
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
User avatar
SmileyFace
Posts: 5761
Joined: Wed Feb 19, 2014 10:11 am

Re: It's fascinating to get your kids involved in investing

Post by SmileyFace »

GoldenGoose wrote: Thu Sep 03, 2020 8:05 am
DaftInvestor wrote: Thu Sep 03, 2020 7:59 am All I can say is you are lucky you did this during a climbing market. They probably would have hated you if they would have immediately lost $100 or $500 instead of getting a gain. I would say you got lucky. I am not sure how old your kids are - but I wouldn't encourage investing until they are late teens. For younger kids with savings - a bank account - even with today's low rates - is the best way for them to see compound interest work.
There that dreaded word again, "lucky". Gosh, why does this community is so obsessed with this word? If you did great, you're lucky. If you didn't do as great, are you unlucky?
I only used it in this instance. Since you disagree this was luck explain to me then how 4 stocks picked by children had an increase in these first 5 business days was something other than luck?
User avatar
orcycle
Posts: 138
Joined: Mon Jul 11, 2011 9:44 am

Re: It's fascinating to get your kids involved in investing

Post by orcycle »

GoldenGoose wrote: Wed Sep 02, 2020 11:09 pm Also apple is one of the holdings. We bought it before the split. When I told my son about apple splitting 4 for 1 his eyes popped thinking he would get 4x the money. So I used the opportunity to explain stock split to him. Now he knows.
My eyes popped (briefly) when Vanguard quadrupled the value of my Apple holding before dividing it by four a couple days later. I’m surprised Vanguard wouldn’t put an asterisk next to a stock that is undergoing a stock split (or a reverse), but there are bigger things to worry about.

I also support what you’re doing, on a level that’s relatable to them at their age. I try to explain things to my kids in the abstract and I doubt they retain anything. I helped my oldest set up her own VG account recently so I hope to help her understand some boring but valuable lessons.
User avatar
arcticpineapplecorp.
Posts: 6222
Joined: Tue Mar 06, 2012 9:22 pm

Re: It's fascinating to get your kids involved in investing

Post by arcticpineapplecorp. »

GoldenGoose wrote: Thu Sep 03, 2020 10:48 am
arcticpineapplecorp. wrote: Thu Sep 03, 2020 10:16 am
GoldenGoose wrote: Thu Sep 03, 2020 7:39 am
arcticpineapplecorp. wrote: Wed Sep 02, 2020 8:52 pm
GoldenGoose wrote: Wed Sep 02, 2020 2:50 pm Today they experience their first retreat (still gain, but less than before) so they get worried. I assure them of the prospect of long term gain.
not with 4 individual stocks you don't.

it's a shame they had to experience their first retreat today.

the market went up today, not down.
This comment is short sighted. The market goes up doesn't mean your investment has to go up and vice versa.
investing in 4 individual stocks is short sighted because they could go to $0, which the stock market won't.

Even if those 4 stocks don't go to $0 your active strategy is poorly diversified and will likely underperform. That's not me saying that, it's Professor Bessembinder:
“The results also help to explain why active strategies, which tend to be poorly diversified, most often underperform,” says Bessembinder, who found that the largest returns come from very few stocks overall — just 86 stocks have accounted for $16 trillion in wealth creation, half of the stock market total, over the past 90 years. All of the wealth creation can be attributed to the thousand top-performing stocks, while the remaining 96 percent of stocks collectively matched one-month T-bills.

source: https://wpcarey.asu.edu/department-fina ... sury-bills
You lost sight of the fact that this is a training exercise to get the kids familiar with investing and not a family's egg basket on the line. If they happen to lose all $2000, which is unlikely, but if they learn good lessons, then it's very well worth it to prepare them for their future, don't you think?
depends.

are you teaching them of the perils of owning individual stocks?

are you teaching them they can own the entire market instead?

are you going to turn them off to investing altogether if they lose money when they could have made money?

are you teaching them about gambling or investing?

are you teaching them that money doesn't matter until it's a certain amount?

is that actually true?

what future are you trying to prepare them for exactly? Future hedge fund or mutual fund manager?

are you teaching them that most (80%) of all fund managers (i.e., stock pickers as your kids now are) underperform the market every single year, and the numbers get worse the longer the holding period:
https://www.spindices.com/spiva/#/reports

are you setting up your kids for failure or success?
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
Topic Author
GoldenGoose
Posts: 329
Joined: Tue Jan 30, 2018 2:08 pm

Re: It's fascinating to get your kids involved in investing

Post by GoldenGoose »

DaftInvestor wrote: Thu Sep 03, 2020 11:26 am
GoldenGoose wrote: Thu Sep 03, 2020 8:05 am
DaftInvestor wrote: Thu Sep 03, 2020 7:59 am All I can say is you are lucky you did this during a climbing market. They probably would have hated you if they would have immediately lost $100 or $500 instead of getting a gain. I would say you got lucky. I am not sure how old your kids are - but I wouldn't encourage investing until they are late teens. For younger kids with savings - a bank account - even with today's low rates - is the best way for them to see compound interest work.
There that dreaded word again, "lucky". Gosh, why does this community is so obsessed with this word? If you did great, you're lucky. If you didn't do as great, are you unlucky?
I only used it in this instance. Since you disagree this was luck explain to me then how 4 stocks picked by children had an increase in these first 5 business days was something other than luck?
I'm not disagreeing with having luck in investing but it seems every time there is a success and it's not the bogleheads-approval method, then it's luck.
winterfan
Posts: 228
Joined: Mon Jan 05, 2015 11:06 am

Re: It's fascinating to get your kids involved in investing

Post by winterfan »

I have an investment account for my kid too, but I think it's too abstract. It's just in the Star fund at VG, since it was only a 1K minimum. The only thing I told her is that if she adds to her account, Mom and Dad will match the amount. The only catch is that she has to wait until she is older to take out the money (maybe 16 or 18). When she is older, hopefully she can see what time does. So far she has invested 500 of her own money (we matched the other 500) and it's around 1400 now. I don't think it means that much to her though. She has a lot of money built up in her savings account too, since she isn't much of a spender.
KlangFool
Posts: 17865
Joined: Sat Oct 11, 2008 12:35 pm

Re: It's fascinating to get your kids involved in investing

Post by KlangFool »

winterfan wrote: Thu Sep 03, 2020 2:17 pm I have an investment account for my kid too, but I think it's too abstract. It's just in the Star fund at VG, since it was only a 1K minimum. The only thing I told her is that if she adds to her account, Mom and Dad will match the amount. The only catch is that she has to wait until she is older to take out the money (maybe 16 or 18). When she is older, hopefully she can see what time does. So far she has invested 500 of her own money (we matched the other 500) and it's around 1400 now. I don't think it means that much to her though. She has a lot of money built up in her savings account too, since she isn't much of a spender.

+1,000.

I started my kids with the Star fund ($1,000 minimum) and then switch into the VG Life Strategy Growth Fund when the amount is big enough ($3,000 Minimum).


KlangFool
Topic Author
GoldenGoose
Posts: 329
Joined: Tue Jan 30, 2018 2:08 pm

Re: It's fascinating to get your kids involved in investing

Post by GoldenGoose »

Great lesson today. Today their account went negative. So far they are down $50. They panicked and I had the chance to tell them "If you haven't sold yet, then it's not a loss. If you get out now, then when the market goes up again, you will lose out". They understood that and left the account alone! Win!
Grt2bOutdoors
Posts: 23060
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: It's fascinating to get your kids involved in investing

Post by Grt2bOutdoors »

GoldenGoose wrote: Thu Sep 03, 2020 1:52 pm
DaftInvestor wrote: Thu Sep 03, 2020 11:26 am
GoldenGoose wrote: Thu Sep 03, 2020 8:05 am
DaftInvestor wrote: Thu Sep 03, 2020 7:59 am All I can say is you are lucky you did this during a climbing market. They probably would have hated you if they would have immediately lost $100 or $500 instead of getting a gain. I would say you got lucky. I am not sure how old your kids are - but I wouldn't encourage investing until they are late teens. For younger kids with savings - a bank account - even with today's low rates - is the best way for them to see compound interest work.
There that dreaded word again, "lucky". Gosh, why does this community is so obsessed with this word? If you did great, you're lucky. If you didn't do as great, are you unlucky?
I only used it in this instance. Since you disagree this was luck explain to me then how 4 stocks picked by children had an increase in these first 5 business days was something other than luck?
I'm not disagreeing with having luck in investing but it seems every time there is a success and it's not the bogleheads-approval method, then it's luck.
That is what’s known as rigid beliefs. They will stay on the ship and go down with it even if rational thinking says abandon ship. OP - you don’t need the forum to tell you how to accumulate assets, truth be told I’d be surprised if everyone on this forum is 100 percent truthful on the sources of income and wealth. Intentional or not, there’s almost always a bit of fudging. The best ones are those who say they did it themselves but omit the help they had or that it was RSUs and stock option lottery tickets that did 90 percent of the heavy lifting but they continue to believe that their work efforts was the sole source for the stock price moving - not speculation or plain luck they found a job that offered lottery tickets. No that was not luck right? Many roads to Dublin as they say, so OP you keep doing what you are doing as that will turn on a light switch for your child that an index in the current age will likely not. It’s all about identification and it is behavioral.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
User avatar
arcticpineapplecorp.
Posts: 6222
Joined: Tue Mar 06, 2012 9:22 pm

Re: It's fascinating to get your kids involved in investing

Post by arcticpineapplecorp. »

GoldenGoose wrote: Thu Sep 03, 2020 2:40 pm Great lesson today. Today their account went negative. So far they are down $50. They panicked and I had the chance to tell them "If you haven't sold yet, then it's not a loss. If you get out now, then when the market goes up again, you will lose out". They understood that and left the account alone! Win!
"But Mommy/Daddy, why did these 4 companies go bankrupt?"
"Mommy/Daddy, what is bankruptcy?"
GoldenGoose wrote: Thu Sep 03, 2020 2:40 pm At first they are reluctant. So to tempt them, I show them my investment account. Seeing what kind of gains I have, they relent and let me have the money. So we open an account and buy stocks from 4 companies in approximate equal amounts
"But Mommy/Daddy, you never told us we could lose money. You only showed us your account that had gains. You tricked us!"

Later in life...
"But Mommy/Daddy, you never told us we could own 8734 stocks. Why did you have us buy 4 stocks when we could have owned 8734 stocks???"
https://investor.vanguard.com/mutual-fu ... view/vtwax
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
sd323232
Posts: 667
Joined: Thu Jun 21, 2018 4:45 pm

Re: It's fascinating to get your kids involved in investing

Post by sd323232 »

Title says investing, but I see 4 stocks were purchased, that's misleading lol
User avatar
FelixTheCat
Posts: 1885
Joined: Sat Sep 24, 2011 12:39 am

Re: It's fascinating to get your kids involved in investing

Post by FelixTheCat »

I remember Peter Lynch. He once said invest in things you know. For example, you drink Coca Cola then buy their stock. Shop at Home Depot, then buy their stock. This is how I got interested in investing. Every time I went shopping at Home Depot I used to think that I am buying product from the company I own. I think it is a good way to get the young ones involved.

As time goes on, maybe you can talk to them about owning 500 companies. S&P 500.
Felix is a wonderful, wonderful cat.
User avatar
SmileyFace
Posts: 5761
Joined: Wed Feb 19, 2014 10:11 am

Re: It's fascinating to get your kids involved in investing

Post by SmileyFace »

FelixTheCat wrote: Thu Sep 03, 2020 3:00 pm I remember Peter Lynch. He once said invest in things you know. For example, you drink Coca Cola then buy their stock. Shop at Home Depot, then buy their stock. This is how I got interested in investing. Every time I went shopping at Home Depot I used to think that I am buying product from the company I own. I think it is a good way to get the young ones involved.

As time goes on, maybe you can talk to them about owning 500 companies. S&P 500.
I read his book back in the 90's myself and adhered to his philosophy (I made out well with the Magellan Fund run-up in my 401K so became a Lynch fan). Unfortunately it cost me money so now Index only for me. :)
Unfortunately consuming a company's product usually tells you very little about the company.
It might be a fun exercise for the kids but personally I think the wrong lessons are being taught. KlangFool's StarFund approach is more appropriate.
User avatar
SmileyFace
Posts: 5761
Joined: Wed Feb 19, 2014 10:11 am

Re: It's fascinating to get your kids involved in investing

Post by SmileyFace »

Grt2bOutdoors wrote: Thu Sep 03, 2020 2:40 pm
GoldenGoose wrote: Thu Sep 03, 2020 1:52 pm
DaftInvestor wrote: Thu Sep 03, 2020 11:26 am
GoldenGoose wrote: Thu Sep 03, 2020 8:05 am
DaftInvestor wrote: Thu Sep 03, 2020 7:59 am All I can say is you are lucky you did this during a climbing market. They probably would have hated you if they would have immediately lost $100 or $500 instead of getting a gain. I would say you got lucky. I am not sure how old your kids are - but I wouldn't encourage investing until they are late teens. For younger kids with savings - a bank account - even with today's low rates - is the best way for them to see compound interest work.
There that dreaded word again, "lucky". Gosh, why does this community is so obsessed with this word? If you did great, you're lucky. If you didn't do as great, are you unlucky?
I only used it in this instance. Since you disagree this was luck explain to me then how 4 stocks picked by children had an increase in these first 5 business days was something other than luck?
I'm not disagreeing with having luck in investing but it seems every time there is a success and it's not the bogleheads-approval method, then it's luck.
That is what’s known as rigid beliefs. They will stay on the ship and go down with it even if rational thinking says abandon ship. OP - you don’t need the forum to tell you how to accumulate assets, truth be told I’d be surprised if everyone on this forum is 100 percent truthful on the sources of income and wealth. Intentional or not, there’s almost always a bit of fudging. The best ones are those who say they did it themselves but omit the help they had or that it was RSUs and stock option lottery tickets that did 90 percent of the heavy lifting but they continue to believe that their work efforts was the sole source for the stock price moving - not speculation or plain luck they found a job that offered lottery tickets. No that was not luck right? Many roads to Dublin as they say, so OP you keep doing what you are doing as that will turn on a light switch for your child that an index in the current age will likely not. It’s all about identification and it is behavioral.
If favoring index investing in favor of 4 stock picks for your portfolio is a "rigid belief" feel free to call me rigid. And yes - I will certainly "Stay on the ship" of holding index funds before switching to a strategy of 4 individual stock picks.
Getting the RIGHT individual 4 stock picks will have a lot of LUCK involved. Indexing Investing has proven to be the solid path to actually "Investing". This belief doesn't make me Rigid - it makes me Smart :)
(I just checked the top of the page to make sure I was still in the right place).
User avatar
arcticpineapplecorp.
Posts: 6222
Joined: Tue Mar 06, 2012 9:22 pm

Re: It's fascinating to get your kids involved in investing

Post by arcticpineapplecorp. »

sd323232 wrote: Thu Sep 03, 2020 2:53 pm Title says investing, but I see 4 stocks were purchased, that's misleading lol
+1
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
Topic Author
GoldenGoose
Posts: 329
Joined: Tue Jan 30, 2018 2:08 pm

Re: It's fascinating to get your kids involved in investing

Post by GoldenGoose »

sd323232 wrote: Thu Sep 03, 2020 2:53 pm Title says investing, but I see 4 stocks were purchased, that's misleading lol
I see. So buying in companies' stocks is not investing. Buying mutual funds is. Got it. :?
Topic Author
GoldenGoose
Posts: 329
Joined: Tue Jan 30, 2018 2:08 pm

Re: It's fascinating to get your kids involved in investing

Post by GoldenGoose »

Can't believe the narrow minded of some of the bogleheads on this board.
Topic Author
GoldenGoose
Posts: 329
Joined: Tue Jan 30, 2018 2:08 pm

Re: It's fascinating to get your kids involved in investing

Post by GoldenGoose »

FelixTheCat wrote: Thu Sep 03, 2020 3:00 pm I remember Peter Lynch. He once said invest in things you know. For example, you drink Coca Cola then buy their stock. Shop at Home Depot, then buy their stock. This is how I got interested in investing. Every time I went shopping at Home Depot I used to think that I am buying product from the company I own. I think it is a good way to get the young ones involved.

As time goes on, maybe you can talk to them about owning 500 companies. S&P 500.
Thank you. At least you're an open minded one.
Post Reply