I was planning on implementing a similar strategy with my daughter soon, which is why this article in the Garden City News caught my eye:
The collaboration with his dad led to an investment of real dollars in early 2013. “Since I am under 18, I could never do the real investing myself – it was nice being able to get a start with the pretend money – but with my dad being in the field, he was able to invest for me.” The result? It was a good year for Apple, Kyle’s by-proxy main investment, and the stock returned a considerable profit – monies that are going toward his college education.
“Kyle came to me with his ‘best idea’ – it happened to be Apple. He laid out the reasons why he liked it.” “I was very familiar with the products, especially the iPhones,” Kyle explained. “Over the prior year, the stock peaked at about $700 per share just after the new iPhone came out, but then it fell to the mid-$400s. We expected a new iPad and iPhone (5) to be released, and I just felt it was undervalued at that time. I suggested that my dad invest.” They jointly made the decision to put real dollars to work – “Kyle’s thesis made sense,” said Mr. Beckmann. “I thought it was worth the risk. I saw it as a really great way for Kyle to learn, not just in the classroom, but to apply it to the real world.”
Kyle also made the decision about when to sell. Looking back, “It wasn’t the perfect time to sell,” the young investor continued. “Apple had a bit of an upswing after we sold.”
So, what lessons can be drawn from this experience?
- Investing in stocks usually requires two decisions (unless you buy and hold forever): knowing the right price to buy the stock at, as well as, having a price target to sell the stock at.
- It is easy for investors to feel regret even after they have profited from their investment, as Kyle did in this case (“it wasn’t the perfect time to sell”).
- It is best to not get overconfident as an investor; one win does not an investing genius make!
Anyone try a similar exercise with their children? Ping me (firstname.lastname@example.org) and I would be happy to share your story.