My son has developed a business viewpoint and is eager to learn and develop a business. He wants to invest in the stock market and I am looking for recommendations on which stock company/brokerage/service would be best for him?

He started a pressure washing business last summer using a pressure washer we bought for him, to keep him busy and off X-Box. He recently invested in a commercial grade pressure washer and surface cleaner and has saved almost $10K. He wants to invest this for his college age use (he is a HS Junior).

This is just not my strong suit I generally max out my 401K and have some IRA and mutual funds but with individual picks I just dont have any great track record.

Any recommendations on a vehicle that he can use to make trades and learn the market to ideally grow his savings?

Thanks in advance.

HK Ag

https://www.bogleheads.org/
Send him there to read and learn

keep saving in a 'high yield' savings account for the time being

'high yield' being currently around 1.25% which is pretty bad but thats the low interest rate environment we are currently living in...

tell him to get a one year subscription the the Wall Street Journal

read that for a year -- become familiar with the basics of financial markets, equities / bonds, economy, taxes, debt, interest rates, etc

after a year of reading and 'letting it all soak in' he should be able to make some decisions on his own in terms of investing

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The high aviation ones will hold their value (Northrop, Lockheed, Raytheon). IMHO - right now Boeing is a great deal at under $140/share.

Once Boeing figures out the software issue, stock will double (if not more) as they are able to restart the 737 line and fill the back orders.

Curtiss-Wright is an okay deal on the day(s) you can get it for sub-$100/share mark. Don't expect it go higher than $115 on any given day though.

Another option, and something my youngest kid is doing, day trading penny stock. My kid went from $200 (the stimulus check) and is up to $1,500(ish) over the past month. To his credit, he studies the market and companies all day long and, listens into shareholders meeting when open. (he's found his nitch)

If he wants to pick stocks and ETFs, something like Robinhood, eTrade, or Vanguard will let you make free trades.

If he doesn't want to research individual stocks, my recommendation is to pick low cost index funds that track the market. Essentially, if you don't have some sort of sense that will allow you to beat the market, the safest bet is to simply buy the market. Vanguard's VOO that track's the SP500 is a good bet.

A high yield savings account is good to set aside funds that need to remain liquid. This money isn't invested, it's sitting on the sidelines. Even at 1.25% interest, the money is losing value not keeping up with inflation. At his income level, and exposure to financial emergencies (a high school junior, for instance, won't need to spring for a new water heater in an emergency), no more than $1000 should be sitting in a savings account, high yield or otherwise.

Also, can he put a little of his money aside into a 529 plan to pay for college?

Would you recommend a new person who's never shot a gun before to just pick up a gun and start using it? Of course not. Training, research...these are mandatory first.

For some reason people invest money either with a financial advisor or just "day trade" without any formal understand of what the heck it is they are doing. Before he does anything, have him read books on investing and on money. The book Rich Dad Poor Dad is an awesome place to start. It's old, but I still believe the mindset taught in that book is absolutely correct.

Add to your assets so they can pay for your liabilities. When put into practice, it's amazing what you can amass. One of the points the book stresses is developing your financial literacy.

So many people don't understand money and how to read a balance sheet. The return on his money in the market is completely trivial to what a truly developed financial IQ can do for him during his life. I'm not talking about reading about stocks, I'm talking about truly understanding a balance sheet and what his looks like. Rich Dad Poor Dad will get him started, but it's a life long pursuit. I read at least one financial book a year (often more).

Have him read the book and start reading other books. There is no magic to the stock market, but simple market returns are what financially unintelligent people rely on and it doesn't benefit them like a financial education would.

Not what you asked, but this mindset was something my father taught me and it has made a huge impact on my life. I absolutely believe that the reason some folks are rich and some are poor is the difference in financial literacy.

I have been educating myself on commercial property investing and how 1031's work. With the subprime market worse than it was prior to the 2008 crash, I'm making sure I'm ready to strike when the time is right. I've participated in a few webinars as well. Get him into this mindset and who gives a rip about 10k in the market. Teaching him to stick it in the market for 6-8% return is of no value to him.

As noted above, Bogelheads is an excellent resource. I'd also recommend a specific book: "A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing" by Burton G. Malkiel. This book examines modern portfolio theory, and provides specific advice on investing, not just what to do, but why. It examines mistakes that have been made in the past, and has pointers on where to go for more information.

Investing in single stocks is like gambling. You can find many mutual funds that show 10% per year over each of the last ten years.

quote:

Originally posted by 1s1k:
Investing in single stocks is like gambling. You can find many mutual funds that show 10% per year over each of the last ten years.

In my opinion, this is the advice I'd stay away from! Not meaning to shit on you man, just an example.

He's got $10k? Find a decent home he can fix up and rent. That $10k should get him a mortgage, granted he'll need mortgage insurance. The education he'd get will be invaluable. He'll also be on his way to a real estate business. Assuming he can 10%/year return in the market (which I doubt), who really cares about $1k? He can get an education, start a business, earn more than $1k/year and start developing a valuable asset.

These are the things that will make a huuuuuuge difference. Buy a house and rent it imo!

He needs to read and study. Commend him on his will to invest. Go from there.

quote:

Originally posted by 1s1k:
Investing in single stocks is like gambling. You can find many mutual funds that show 10% per year over each of the last ten years.

agree

typically would tell someone to stay away from individual stocks until you have ~$100k and then limit individual stocks to no more than 10% of the portfolio

individual stocks can go to zero. been there / done that ... hello Enron / Lucent Technologies anyone??

a good index mutual fund may lag the market ... but its not going to zero.

once you get north of $100k picking some individual stocks can be worthwhile but taking care not to overweight and maintaining discipline with them

this advice is worth what you paid for it

and all of this after you have built up a nice cash cushion to weather down times

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I would steer him to start a Roth IRA with Vanguard, more mutual fund than individual stocks. With some funds then no paper statements I think the minimum to start is $1k.

Once that is started he could dabble with individual stocks if desired.

Of course at his age any IRA $$ would be in stocks of some flavor, aggressive or index.

No better way to than to jump right in. Have him start with $100 to keep his interest in it every day.

Maybe tell him to buy GNUS to start. Its cheap and has been going up. Made 25k off it in the last month.

He's a junior so he may need the money in 2 years or less.
I'm all for learning the lessons but that's a short time in the present economic situation to invest.

quote:

Originally posted by woods62:
https://www.bogleheads.org/
Send him there to read and learn

^^^^ x 1000

Thank you woods62 - exceptionally good advice!

He needs to buy a few pressure washers and start a business by hiring his reliable friends to do the labor and he makes the sales and marketing. Hit up realtors that are listing houses. A sparkling clean driveway and sidewalk with no oil stains can change the curb appeal dramatically.

I use Schwab for myself and kids. Very little $ to open and Can buy their fund with like $100 and $1 repeat buys. $0 commission stock trades. I have a handful of individual stocks but mostly sector funds becuase I can’t afford a big enough position in all the companies I like.

No one mentioned Investor's Business Daily. They do all the research for you.

This thread is confusing especially with the different advices.

OP, you and your son need to figure out what he wants to be or what to focus on. Does he want to run a business? Does he want to pick stocks? Does he want to go to school? I’m even surprised at one recommendation that he become a landlord.

The first step in sound money management is to figure out what and when you need your money to do for you. Figure out all the different needs your son needs now and for the future.

Does he need money for immediate wants and needs like money to keep operating his business? Buy clothes?

What needs will he have medium term like 5 years from now? Or buy a car?

What long term needs does he have? Does he want money so he can retire early? I suggest he does.

When you have captured all his needs, then he needs to figure out how to finance those needs. How much and how long does he expect to earn from his business net of expenses? Are there other income streams he can plan on getting? Besides the $10k, are there other pools of money he has?

So now you have his money needs split into short term, medium term, and long term time horizons. You also captured his projected money supply and current money supply which includes the $10k.

The next thing is to determine how to best deploy his current and projected money supplies to meet his money needs. Can his projected income stream meet all of his current and medium term needs? Or does he need or want to use a portion of his current money supply to meet a portion of his current and medium term needs.

Now that you figured out how much of the available money will go to immediate, medium, and long term needs. How you manage each portion of the money supply is dictated by the time horizon. For immediate needs, you can only put it in a checking or savings account. For the portion that’s long term like retirement, that’s the easy part. For his age, Open a Fidelity account (I don’t have one because I’m not his age), invest in one of their no load, no fee, total stock market fund and he can live his life. Time is on his side. When he gets into his 30s then he can dabble with stock picking if he wants to.

quote:

Originally posted by coloradohunter44:
No one mentioned Investor's Business Daily. They do all the research for you.

I agree. IBD is a good resource. Lot's of good information and educational articles. Not inexpensive but worth the investment. TD Ameritrade offers low cost trades, their "think or swim" platform is very good and they offer lots of educational webinars that one can participate in to learn. keys for a newby are to be conservative, invest in good companies and remember that a stock can go to zero, max risk. Great that he wants to get smarter so young but caution that the market can be brutal when greed overcomes fear.

Can also recommend the website "Seeking Alpha". Must understand that the posters are experienced players but you have to take what is said with a grain of salt and don't necessarily rely on the opinion of any single player. You have to know enough to filter.