Back Investing for teens
D. Murali
| Today's youths may have to know more about money than what their parents or grandparents ever had to know. |
How old is old enough to invest? Cut it. For, you can never be too young to understand investing, says Janet Bamford in Street Wise from Bloomberg Press (www.bloomberg.com). "The great thing about investing is that you can start slowly, bit by bit, and get more deeply involved as you learn more."
Gen X investors
The book is a guide for teen investors. Teens form a powerful group of the population because `when it comes to making money by investing,' time is on their side. "A study by the National Association of Securities Dealers (NASD) showed that Gen X investors (defined as 18 to 34 year olds) make up 19 per cent of investors."
Bamford tells young investors that investing and the stock market will play a vital role in their future, irrespective of what they choose to do with their life. "Whether you want to build a career in business, be a freelance artist, or become an Internet millionaire, knowing about managing your own money will give you freedom and choices in life that you wouldn't otherwise have."
Know your money
Today's youths may have to know more about money than what their parents or grandparents ever had to know. Reason? "For better or worse, over the past several years there has been a trend toward ordinary people handling their own money rather than depending on an institution to do it for them."
Even if you are going to be rich enough to hire your own money manager, you must know what's going on, lest somebody took advantage of you! "There are a lot of charlatans in the business," reads a quote of Chris Davis, a mutual funds manager. "You need to learn to make sense of the idiocy that is served up as general financial planning advice by some." Learning, therefore, the how of money management is "an important part of your education."
A chapter on `Stock market 101' begins on a reassuring note: "The first thing you need to know is that the ideas behind investing are really very basic. This isn't rocket science." And, "You don't need to know everything before you start tucking away some money." For the teenager, the biggest enemy is `inertia — the tendency to do nothing', says Bamford. To combat this, take a few steps to learn about investing, and then take a few steps to actually do it! "These can be the most profitable steps you've ever taken."
Stock picking
The book devotes a chapter to the basics of stock picking. Because "Plunking down your cash without learning something about choosing a stock would be a little like landing in a foreign country without a map or phrase book." Teens have a key advantage: The ability to spot trends and `being alert to what's new,' unlike adults who `get stuck in patterns, using the same products and being exposed to the same cultural influences year after year.'
Bamford presents nuggets of information throughout the book. For instance, in one of the `street smarts' blurbs, you'd learn what a $1,000 investment in Microsoft when it went public in March 1986 would now be worth! Another blurb educates readers on how Wall Street got its name: "Early settlers of Manhattan built a stockade fence — a wall — at the town's northern boundary. A street was laid alongside the wall in 1685. The wall was taken down as the city grew northward." One other `smarts' is that the trading floor of the NYSE (New York Stock Exchange) is `about the size of a football field.'
Pick up stock market lingo such as rally and blue chip, paper profit and dead-cat bounce, through `street slang' bits. `Go long', Bamford explains, in simple language, as `trader talk for buying a stock... think of it as the opposite of shorting.'
Trading games
Flex your muscles by playing trading games and stock market simulations on the Net. The book makes a mention of Vijay Saluja, `an 18-year old prodigy from Michigan, who won first in The Investment Challenge (an Internet-based game with cash prizes) for two consecutive semesters.'
Can successful performance of a paper portfolio be duplicated in real life? "Usually not," says Bamford. Why so? Because games can allow you to dabble with big volumes; also, taxes do not get factored in when you play. More important, "Trading with real bucks introduces two emotional aspects that are often missing from the games: fear and greed."
A book that can make you feel you should have read it sooner!
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