DD 22 wants to know about investments..

[donheff]

I recommend "If You Can" by Bill Bernstein. There is discussion of the book in this thread. https://www.bogleheads.org/forum/viewtopic.php?t=136528

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.

Sounded interesting so I clicked the link and realized that I had seen that book cover. That's because I already have it and probably gave it to my kids. Maybe I should move this post over to the "what have you forgotten recently" thread.

 

[rayinpenn]

Just ordered the millionaire teacher and how a second grader beat Wall Street - they will be under the tree... I also forwarded some of your suggestions...

thanks to all...

 

[steady saver]

The Millionaire Teacher

I gave this to my nephew last year. Turns out the author had been his teacher at the American School in Singapore. My nephew loved the book and got interested in investing.
Highly recommended.

 

[kcowan]

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 would say to her: "Let's investigate this stock as an investment!" like why has the stock dropped? That might explain the 10% yield. What is the likelihood that the stock will rise or the dividend will fall?
etc.

She has already expressed an interest. Giving her a reading list is unlikely to bear fruit. Carpe Diem!

 

[sengsational]

Giving her a reading list is unlikely to bear fruit. Carpe Diem!

I've read a few of those and most of those concepts are not going to be of much interest to a 22 year old. As you say, seize the day with what interests her at the moment. Don't miss out on the "teachable moment" with a tomb on planning your retirement, for goodness sake.

 

[athena53]

A couple more thoughts: if she likes podcasts, I recommend Jim Cramer's "Mad Money", especially the beginning of each chow where he either comments on what the market is doing or gets into specifics of some factors to look for in stock-picking. One caveat: ALL the CEOs he interviews talk a good game but the stocks don't always turn out to be winners. One (Theranos) got nailed for falsifying records. He does a good job covering the basics, though.


Also - could you re-open the dialogue by asking her what upset her about your previous discussion and what type of input she needs from you? I'm assuming your concerns about the stock she wanted to buy were said in a neutral tone of voice (and I would have had the same concerns about it).

 

[Milton]

I recommend Jim Cramer's "Mad Money"

Unless his daughter isn't really interested in education and instead merely craves hyperbolic entertainment, it's difficult to imagine she would get much of value out of this.

 

[athena53]

Unless his daughter isn't really interested in education and instead merely craves hyperbolic entertainment, it's difficult to imagine she would get much of value out of this.

As I said, I like his "macro' views on the market. I also like his explanations of P/E ratios, how to adjust them for growth, advantages of dividend-paying stocks, benefits of stocks vs. ETFs, etc. When people call in asking about a particular stock, you can see what he looks at in deciding whether to tell them to buy, sell or hold. Good basic stuff. And yes, he's a bit flamboyant but RayInPenn's daughter may find him more interesting than his more staid colleagues.

 

[racy]

The female mind works differently than the male mind. She wasn't asking for advice, she wanted confirmation. She's not going to read any books you give her! I agree with RobbieB: save the book money and put it towards buying her stock. Let her learn from her own experience.

 

[Maenad]

Yeah, cuz a 22YO young man will come to dad for investing advice rather than bragging about his "hot stock".

 

[street]

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.

Excellent idea! Hands on and ownership will teach her more then any book could do.

 

[kcowan]

A couple more thoughts: if she likes podcasts, I recommend Jim Cramer's "Mad Money"... He does a good job covering the basics, though...

Although he covers the basics, his hit rate is 47% winners. Might be a bad start. Maybe tell DD to flip a coin as a better choice.

 

[Scuba]

Great suggestions in this thread. My 27 YO niece asked me to help her with some basic advice. She wants to learn more about how to decide between paying off her 6% student loan debt, saving more in her 401K, and saving for a home purchase. She also has questions about Roth vs tIRA's. I don't want to overwhelm her with too much material, and would like to make sure the books I'm recommending cover not only how to invest, but a more complete picture that answers some of her other questions. Thinking of:
- The Millionaire Teacher
- Simple Path to Wealth
- If You Can
- Why Didn't They Teach me this in School? by Cary Siegel

If I want to recommend between 2-5 books to help her start to get some basic personal money management and investing knowledge, what do you think about these four? She is a healthcare professional, has a PhD in Physical Therapy, so she's no dummy but not into business or finance. Thanks!

 

[RenoJay]

This is a great “natural consequences” teaching opportunity. Let her put a small sum into her stock pick and see how it does, and perhaps put a similar small sum into a diversified ETF. Agree that in five years you’ll determine the winner.

 

[OldShooter]

... what do you think about these four? ... Thanks!

I don't know them except "If You Can." That is only fifteen pages and includes some book recommendations, so I think it is the logical place to start.

I strongly disagree with those suggesting that she pick a stock, buy it, and track it. That teaches seriously bad concepts: (1) Not having a diversified portfolio, (2) watching her portfolio too closely, and (3) that buying individual stocks is a good idea for individual investors.

I would encourage her instead to go with a portfolio along the lines of Bernstein's suggestions in "If You Can," possibly adjusted by a little paternal wisdom.

Harry Markowitz's advice: https://youtu.be/TbMjIn1p-i0

 

[pb4uski]

This is a great “natural consequences” teaching opportunity. Let her put a small sum into her stock pick and see how it does, and perhaps put a similar small sum into a diversified ETF. Agree that in five years you’ll determine the winner.

Or just show her the Beat Boho thread and compare Boho and nunnun's performance.

 

[Doc0]

How about doing some paper trading using her stock BRK.B and VTI maybe GOOG AMZN and SPY

Go back as many years as you want and pull off prices in Jan of each year and spend some "paper money" the same amount for each stock to buy some shares and put it into google finance or yahoo finance, the results will speak for themselves. Show her how to do it then let her play with it

I'm a fan of Phil DeMuth books

 

[FreeBear]

Maybe encourage her to buy her "hot" stock, BUT front your own money for her to buy a comparable stake in your favorite broad market stock index fund or ETF. Maybe fund her to start ROTH IRA with an index fund.

You can get together regularly (say annually) over dinner and drinks and trash talk, I mean discuss the performance, of each others pick (hot stock vs boring index). You can even place "bets" on who does better over a given year or, better yet, decade. The loser picks up the tab.

This could be a great opportunity to talk about "hot stock picking" vs buy and hold indexing. At the minimum, it will be a great excuse for daddy and daughter time over the years!

 

[atmsmshr]

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.

Just gift wrapped hard copies of Random Walk and Four Pillars as Christmas gifts for the kids (all in their early 20's).

Walt - just looked closely at your holiday cheer avatar - you field dressed Rudolph!?!

 

[Walt34]

Walt - just looked closely at your holiday cheer avatar - you field dressed Rudolph!?!

I don't think it is Rudolph specifically, could be any deer. Here's the full size image. I just searched on "strange Christmas photos" or similar and stumbled across it.

I think it's funny. DW thinks I'm demented.

 

[MikeD]

I do not have any children. But like many others, I was one once. I remember being 22 yo. I noticed some old people were better at life than others. I did not wonder why and only thought about my incredibly smart wife and me.

She and I are completely different in many ways and alike in many ways. We use each other's strengths for our decisions. I have never had an unexpressed thought and my wife barely speaks but when she does I make sure to listen.

One of the approaches I use on people who are younger than me (Most people younger than me don't like to read, apparently.) is to mention that time will go by regardless of what their actions are.

I unsuccessfully tried to get a young co-worker of mine to go to community college with the argument of "Eight years from now you will be eight years older and if you go to one or two classes a week you'll have more money and be eight years older. If you don't take classes, you'll just be eight years older." I scored big with the others in the room but failed to convince my younger friend. I taught him microprocessor programming instead. He doing OK but not great. That was in 1982.

Also, I could not listen to my parents very well at that age. My parents also did not listen to me and my Dad expected to tell me what to do in the form of advice. If I did not do exactly what he said he got mad about wasting his time.

My Dad told me "Don't spend more than 33% of your income on housing, 25% on your car, and save at least 10% -- no matter what."

I signed up for the 401K at my first job in 1977 when it first became available. I was 23 yo. It appeared to be free money and I was all over it. I made $10,200 per year with benefits. I had been living on $1,200 PER YEAR including insulin and gas for my car. I felt rich. One of the benefits was paying for college. I was all over it. I had a life expectancy of 45 but still couldn't turn down a 10% match of FREE MONEY.

Mike D.