Jump right in and grab the money
Lately I've read a number of "Financial Success for Teens" books lately because I have a number of teens who really need skills of any kind and I want to get a handle on what exactly to teach them and how. Unfortunately people are living in entirely different worlds; the ones I deal with have never had money, and have no chance of getting any, legally, whereas these books assume you have a suburban kid, and you have enough money to buy the book, and the kid is just eager to get rich.
But one thing they have in common that really irritates me is the idea that you can just jump right in to the stock market and if you make a good guess about the direction of a company, you'll make big money fast if that company does well. I think this is a damaging idea to give to kids. There are several reasons.
First, broker fees ensure that even a stock that is on an even keel is a losing proposition. Ones that are only improving incrementally are also losers. You pay enough to play the game that you have to win substantially to win at all, and this might take a while, usually longer than a teen's attention span (this is what happened to me, many years ago as a suburban kid who had money from mowing lawns or something). This is not bad as long as the books would mention it, which they don't. A note of caution would really help in this situation but there is none to be found.
One of the biggest causes of crashes is overenthusiasm for various companies that are all out there competing for our attention and support. If you can imagine with me thousands of teens with starry-eyed enthusiasm for some tech company that they can guess is on the cutting edge of something: this on top of thousands of serious investors who are in the same game. What you get in the end is way too much money in the situation and a crash is inevitable. And who's going to lose? Probably the teens who don't have the foresight to "pull out before it's too late." Lots of kids are going to go down here. Although I was one of them, at some point during the seventies, I don't remember feeling the sting all that badly and maybe if anyone is going to lose, suburban teens are as good as anyone.
But on another level, I don't want to be the one who led them to the slaughter, so to speak. I don't even want to be part of agreeing that it's great to lead them to the slaughter.
The woman who wrote the book was probably not too happy to read my review. She's part of a very well-organized, mostly Christian, group of authors who write mostly self-help books like this one and routinely give each other fives and thumbs up for every book they write. I had no problem giving her a five; it was well-written and it did what she said it would do, and I have to be seriously angry to go below that anyway, given what we're doing. I say that as one who has probably gotten more than my share of fives in the same process. But I'm getting better at saying what I feel in this situation and in that respect I kind of let her have it.
When I was a kid it was some stock like RCA that I considered cutting-edge electronics, and I found out various things after I'd bought the stock (which was only a couple of shares). One, dividends happen only every three months and when they do they're infinitesimal (especially if you only have a couple of shares). Second, stockholders actually have to attend meetings to speak up for the habit of sharing profits with shareholders although companies have good motivation to do that anyway.
But finally, the majority of truly successful American companies (like Nike and Apple) have gotten that way by exploiting something like Asian cheap labor or Namibian minerals, to the point that they are paying really low money and getting really high benefits, and somebody is losing big somewhere. You are basically putting your hard-earned cash into an American imperialism that has been colonizing every corner of the universe and is now beginning to turn on itself because there is nothing left to steal.
I think that experience turned me into a leftist hippie. And that was something I'm sure she didn't want to know.
posted by tom @ 8:39 AM
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