I grew up in a house where investing was often discussed. My dad was, and still is, a Chartered Financial Analyst (CFA) - he manages wealth for his clients. Much of that involves buying and selling stocks, and our dinnertime conversations often touched on the ups and downs of his jobs, leading to topics such as investing for kids as my interest of the topic gradually expanded. I remember a really, really crappy day in October of 1987 that led to a stressful few months. But much of the discussion was without a ton of emotion; it was simple and factual. Learning the basics of investing was an incredible gift – one I intend on passing along to my kids. And it might just help me beat the market, too.
As a young boy, my grandfather gifted me some shares of Exxon oil company. It wasn’t hard for me to understand that I owned a very small piece of Exxon, and it was to my advantage to buy from them. In those days, where you could have four different gas stations at an intersection, I would annoy my parents with suggestions that we go to Exxon. I understood, in very simple terms, that it was good to support your own company.
When I was growing up, I played with the typical toys boys played with in the 80s –GI*JOE, Transformers and baseball cards. These toys that I knew so well would provide me another benefit later in life – valuable lessons about investing.(A quick note on another important toy of the era, Legos. I loved them as a toy and to this day remain frustrated that I cannot invest in them – Lego has been privately held since 1932.)
When I watched after school cartoons (another staple of growing up in the 80s), I would see that GI*JOE and Transformers were both “made by Hasbro” as every TV commercial stated. Knowing that it made sense to buy what you know, I suggested to my dad that he should buy Hasbro - all my friends and I loved their stuff.
My dad says he still wishes he had listened - he held off on investing in the toymaker in 1983 after my recommendation. It would have been a good investment; from 1982 to 1986, Hasbro had a good run – its stock price was up more than 500%. And what was interesting, as the fad died in 1986, the stock price faded as well.
Luckily, he wasn’t so quick to dismiss my next phase later that year when I got into baseball cards. Really into baseball cards. Naturally, I asked my dad about Topps (the biggest company at the time). We looked at it and bought a few shares 1987. As the fad grew over the next 6 years, the stock price did too, about 700%. By the time I was tiring of the hobby in 1991, we sold our shares for a nice profit. The stock dropped in 1992 as they went out of style.
Not every fad is worthy of investment, and most will not provide such great returns. But as Peter Lynch said in One Up on Wall Street, buy what you know. Talk to you kids about investing and help them see how it works. Let them buy a few shares of stocks of companies that they like. If they learn at a young age, they can develop investing skills that will serve them their whole lives.