Investing Education for Grandkids
Recently, when I was the guest on a radio show, the host asked where young people learn about money, investments, and personal finance. Schools are too busy with diversity training and sex education to teach personal finance. Even at the college level practical money management is scarce. Many parents, especially, the Boomers, try to keep their children from worrying about money instead of teaching them about it.
The truth is that there are few opportunities for young people to learn about money and investing. But grandparents and parents have new ways to teach the youngsters about personal finance that they should take advantage of.
The Internet attracts the youngsters and offers a great opportunity for grandparents and others to teach young people about the stock market, individual stocks, compound growth, and other aspects of investing. Young people also can learn about losses, why they occur, how to react to them, and the lessons to learn from losses.
The advantage of using the Internet to teach these lessons is that, if you select the right vehicle, the lessons can be taught while putting a very small amount of money at risk.
Take a look at a web broker with which I have done some consulting, My Stock Fund located at www.MyStockFund.com. You can combine this broker with our portfolio of 15 Stocks for the Next Decade to provide valuable lessons to your youngsters with a modest investment. And you have the potential to increase the young folks’ net worth over time.
MyStockFund is a fractional share broker. There is a small required minimum purchase. You can buy less than a share of stock or as many shares as you want. You do not need to buy whole shares of stock. The broker combines purchases from its account owners to buy whole shares in the market, then divides those among the accounts. You decide the dollar amount to invest after meeting a minimum of $10 per stock. If your purchase amount is less than a share of stock or is a number of whole shares plus a fraction of a share, that is the amount of shares allocated to your account. You could assemble a diversified portfolio by investing only $10 in each company you want to own.
The broker offers a wide range of stocks and exchange-traded funds for purchase, and will add others to its purchase list when requested by customers. You can make one lump sum purchase and watch how the portfolio performs over time, schedule regular investments, or make periodic investments. The money to invest can be charged to a credit card or drafted from your checking account as purchases are scheduled.
A fractional share broker is not for a day trader or frequent trader. To combine purchases from customers, purchases and sales are generally on a schedule. MyStockFund has a weekly purchase each Thursday. These Plan Purchases can be made on an automatic schedule or as one-time orders. All sales are placed as market orders, and the fee for all sales is $12.99.
The cost of using a fractional share broker can be dirt cheap and is much less per trade than even the deepest discount Internet brokers. MyStockFund offers three plans.
The Basic Plan has a $5.98 monthly fee, which includes Plan Purchases of two stocks each month. Additional purchases are $2.99 per order. The Flex Plan has an annual fee of $59.99 with no Plan Purchases included. All purchases orders are $1.99 per stock. The Diversified Plan has an annual membership fee of $39.99 and all purchases are $0.99 per order. In addition, there is a monthly fee of $9.90 that includes 10 purchases per month. Under each of these plans, a real-time market purchase can be made for $12.99, and all sell orders are $12.99.
You can see how a very small amount can be invested while keeping fees low. Because of the low fees and low minimum investment, a fractional share broker is a good way to introduce your young one to investing with real transactions.
One way to do that is to use MyStockFund to invest in our 15 stocks for the next decade. This is the portfolio of stocks we first recommended in December 2004 with the intention of holding the stocks for 10 years unless there is a significant change in a company’s the long-term outlook.
In developing the portfolio I tried to follow Warren Buffett’s maxim that one should purchase a stock only if you would be content to own it if the markets were closed for the next 10 years. Selecting such stocks involves looking at the operating business of the company and deciding whether you want to be a partner in that business. In other words, buy a share of stock only if you would be willing to buy the entire company if you had the capital.
I update the portfolio regularly, most recently last February and again this month in the second section of this issue. Take a look at the portfolio and consider combining it with a fractional share broker to teach youngsters you love about money and investing.
