To the Moon
What teenagers should know about investing?
“Mom, I made so much money today!” my teenage son exclaimed with joy while running out of his bedroom. Tesla shares he owned shot up, rising significantly one day in August last year. Since he was young, Jonathan has been entrepreneurial and business-minded, earning money by building and selling custom PCs, mowing lawns in the neighborhood, dog sitting and walking, and more. We helped him to set up his brokerage account using his savings, and he bought a couple of Tesla shares in March last year when the pandemic-induced lockdown began.
Why Tesla? It was because he is a fan of Elon Musk, the Tesla and SpaceX CEO, and Musk’s innovations. Jonathan pored over articles and books about Musk, followed Musk on Twitter, and could recite upcoming Tesla feature releases and SpaceX launch schedules. So when he asked me to buy Tesla shares, I felt good about his decision — he seemed to know a bit about what he was getting himself into.
Since that day in August, he was glued to his brokerage account app checking price movements almost every hour. His mood included dramatic highs and lows depending on stock market moves, which spilled over into his interactions with the family. Worried about him and his mental health, we thought it was time to intervene to land a few key lessons.
#1: Have a conviction armed with research.
“Why did you decide to invest in AMC?” I asked Jonathan. He just shrugged. He wasn’t particularly drawn to AMC, nor did he know much about its financials other than what’s obvious, a large movie chain. He provided a quite different answer from his deep study of Tesla. We shared with him the importance of knowing a company and its business for investment decisions, in other words, doing some proper research beyond following what’s shared on social media. It provided us with an opportunity to explore the elements of a good company and a good stock and why they are not necessarily the same.
#2: Crawl, walk and run.
As an angel investor and a former fund manager for the William C. Connor Educational Investment Fund, one of the largest university student-run portfolios in the world, I know a little bit about investing from my days as an MBA student. When my son asked me about options trading, I felt curious and at the same time nervous. “What about options trading?” I asked. He was seemingly inspired by overnight success stories he read about on the Reddit forum but was unaware of risks that he could lose everything in trading options and other sophisticated investment vehicles.
#3: Keep emotions in check.
Urged by his friends, Jonathan bought GameStop shares hoping they would take him to the moon when the stocks were trading high, but he couldn’t stomach losses when they began falling 4 hours later on the same day — he got scared. We, adults, know the consequences of letting our emotions run our investment decisions — most likely, they won’t be good! This is especially acute among teenagers who are still developing physically and emotionally, and they need reminders from grown-ups.
