DD 22 wants to know about investments..

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rayinpenn

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I’ve explained my philosophy on low cost highly diversified etfs and mutual funds to her but it hasn’t been easy. Last night she comes to me with a stock paying nearly 10% dividends. I ask a couple of questions
1. It has been around 3 years.
2. It had a high of $10 and now is at $6

I said with all the boats in the harbor so high doesn’t it concern you that it has lost 40%? The discussion deteriorates like kinda like teaching a teenager to drive. She’s crying of course and I am a bad person for asking tuff questions. “I’m just learning”

I send her a link:
http://www.transparentinvesting.com/uploads/wholestory.pdf

Can anyone recommend any investing book written in plain English. My first book was the intelligent investor by Ben Graham but i think the advent of index funds has made it dated.
 
No book necessary. Have her read the boglehead wiki.
 
I just bought DW "Investing for Dummies" She wants to learn so if I am no longer able to manage our accounts, she'll have some basic knowledge. She's always relied upon me to make our investment decisions. I can't say one way or the other whether this book is any good or not.
 
CRLLS said:
I just bought DW "Investing for Dummies" She wants to learn so if I am no longer able to manage our accounts, she'll have some basic knowledge. She's always relied upon me to make our investment decisions. I can't say one way or the other whether this book is any good or not.
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I was also going to recommend a book from the "Dummies" series. They're always clearly written with a sense of humor. It's really a great sign that she's asking questions. You may not be the person to teach her (maybe it's like teaching your own kid to drive) but what's important is that she's interested.
 
Being able to teach somone how to properly invest is a gift, required nurturing and doesn't happen in a day. At 22, my ole man was trying to explain to me why bouncing checks at taco bell was bad. I had no clue. FF 15 years and I'm well on my way, and actually giving the ole man advice.

I had to learn it on my own with guidance. I would advise to understand which learning method she enjoys and cater to that. For me it wasnt reading books, but interacting on this forum, for her it might be reading books or just conversing with dad about investments.

If she enjoys writing, I would challenge her to write a book about low-cost investing.
 
VinTek said:
I heartily second this recommendation. In fact, Bill Bernstein makes this book available to download for free in Acrobat, mobi, and Kindle formats at his website, Efficient Frontier. Go to this link for get it.
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Me three! It's only about 15 pages, hardly a burdensome read.

Of course she will then need to read the books that he recommends.
 
I suggest she buy a hundred shares. Maybe she'll make some dough. Maybe she'll lose $600.

Either way she'll learn for herself and that's what you really want eh?

I lost 25 grand playing "penny stocks" and at age 35. Better to lose six hundred at 22.
 
pb4uski said:
You can lead a horse to water......
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I think it’s very positive that she is showing an interest. That’s more than I did at her age. The OP can try to make the most of it by referring her to simple, user friendly material that will help her with the basics, including LBYM and pay yourself first. After that, seeing positive results will fan her interest further. Of course, if the market crashes, a novice could be discouraged. But this is a learning process and Rome wasn’t built in a day.
 
RobbieB said:
I suggest she buy a hundred shares. Maybe she'll make some dough. Maybe she'll lose $600.

Either way she'll learn for herself and that's what you really want eh?
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I like that idea. I've always told people it was better to make mistakes early when you can recover from them. I certainly made enough. If she does end up with a loss, support her by reinforcing the fact that she's still learning and this is the time to have failures. Do NOT say. "I told you so". If she loses money she may realize that the questions you were asking were valid ones and maybe she'll be more receptive to your ideas on the next investment she wants to make.

I can relate to all this because my Dad started investing in his 30s, before discount brokerages and on-line trading. I was fascinated by his Value Line charts and kept thinking about what I'd buy except that I was in HS and didn't have anything to invest. He'd tell me his own mistakes (I will never write naked options). Dad is 87 now and I just thanked him again recently for taking my interest in investments seriously. Since I had a couple of long stretches as a single, Husband #1 was a financial mess and Husband #2 was a dear man with no interest whatsoever in investing, it has served me well.
 
This is copied from an email I sent to my sister a while back and to one of DW's cousins who has two sons just graduated from college.



The books I found helpful are these:

The Millionaire Teacher by Andrew Hallam

How a Second Grader Beats Wall Street by Allan S. Roth

These first two are the ones I absolutely recommend.

I also have read these:

Predictably Irrational by Dan Ariely – I found this very interesting!

The Four Pillars of Investing by William J. Bernstein

Why Smart People Make Big Money Mistakes by Gary Belsky & Thomas Gilovich

Your Money & Your Brain by Jason Zweig

The Investor’s Manifesto Preparing for Prosperity, Armageddon, and Everything in Between by William J. Bernstein

A Random Walk Down Wall Street by Burton G. Malkiel

And if you really want to get deep into behavior issues with money– Thinking, Fast and Slow by Daniel Kahneman, the only psychologist to win a Nobel Prize in Economics. It’s probably more than most people want to get into but I found it fascinating. It’s also a rather thick book.
 
I agree with "The Millionaire Teacher"
I also like "The Wealthy Barber". (More than just investing - also insurance, real estate, etc... very pragmatic about all aspects of financial life.)
 
When I was her age my employer shared a floor in our office building with Dean Witter. I had a broker and he recommended individual stocks.... I made money on some, lost money on others but overall did ok.... I then read about index mutual funds and decided that was a better course.

At another place that I worked one of my close colleagues was really into the stock market... it was like a hobby for him... I recall one year that he made more from his stock hobby than he did from working... and promptly lost much of it the following year. He later went on to start a high-tech investing newsletter and has had more than his 15 minutes of fame.

I was intrigued by what he did but decided that I wasn't willing to spend the time necessary to properly research stocks and decided that buying and holding index funds was more for me.
 
If it were my daughter that came to me with a specific stock pick, I'd say "let's do some digging!"

One thing I wouldn't do is say not to invest in it before I researched the company.

Now, let's say we discover that the company has a tiny book value. Even at $6 the PE is way high for companies like it. The price went to $10 because there was some news that never came true. Or whatever. Maybe this thing had a solid business and they simply got a little bad press. You don't know until you look. Now, I know there are many people here that don't believe in holding individual stocks, but maybe your daughter is the next Warren Buffet. Sadly, we'll never know now because she's off in the corner crying.
 
It's impressive that she's interested at her age, and there are worse things than buying a dog of a stock (and who knows? I bought CMI 2.5 years ago, it promptly puked almost 50% and now it's up 44%, which shows that my timing sucks.)
The Berstein book for millenials looks really good, and he appears to start with a 3 index fund portfolio, which is a good starting point, IMO. I started off with a 6 fund Lazy Portfolio and branched off from that, but it worked great my first 7-10 years.
I also was influenced by Malkiel and learned a lot from Bernstein's 4 Pillars. I bet the Dummy's book is good as well, although I haven't looked at it.
 
The books I found helpful are these:

The Millionaire Teacher by Andrew Hallam

How a Second Grader Beats Wall Street by Allan S. Roth

These first two are the ones I absolutely recommend.

I also have read these:

Predictably Irrational by Dan Ariely – I found this very interesting!

The Four Pillars of Investing by William J. Bernstein

Why Smart People Make Big Money Mistakes by Gary Belsky & Thomas Gilovich

Your Money & Your Brain by Jason Zweig

The Investor’s Manifesto Preparing for Prosperity, Armageddon, and Everything in Between by William J. Bernstein

A Random Walk Down Wall Street by Burton G. Malkiel
Click to expand...

Great list. A personal favorite is Your Money & Your Brain.
 
RobbieB said:
I suggest she buy a hundred shares. Maybe she'll make some dough. Maybe she'll lose $600.

Either way she'll learn for herself and that's what you really want eh?

I lost 25 grand playing "penny stocks" and at age 35. Better to lose six hundred at 22.
Click to expand...
I agree. Resist the urge to make her decisions for her.

Sometimes experience is the best teacher, and this is often the case with investing. Allowing her to realize on her own that many mutual funds charge hefty fees will make the case for ETFs better than any advice you may dispense.
 
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