Stuart Fleming added a great comment to my recent post about teaching children financial responsibility. He thinks about these things and has a few ideas himself. I want to quickly comment on the idea that we grown ups should invest and should teach our children to invest.
I've been a little bit distracted and so have not been able to give my $10,000 Challenge as much attention as I'd like. The idea of it, though, is to take a chunk of money and put it to good use to 1. realize a good return and 2. add more value to the economy. Thus far I've used $100 of this money to buy the URL www.100ThingChallenge.com. Also I am using some of this money to develop an identity for the 100 Thing Challenge with one of my friends who is an amazing designer.
But also I invested some of it in Apple (AAPL). Nothing big time. I bought 15 shares a while back when it was trading below $200 a share. Looking over the company's fundamentals, anticipating its strong earnings, and believing that its Tablet will be "game changing" like the iPhone was, I believed that Apple was a sure bet. And it appeared that I was right. Pretty much the day I bought, the stock rode up to $205 and then into the $220s. All the fundamentals stayed in place. Earnings (to be released on Monday) are sure to be great. Price targets are being set for $240 or even $260. This stock is exactly what an average investor can choose with minimal risk.
But then Friday. Apple dropped like Newton's Apple right through $200 a share, which was my stop price. Why? It's a portrait of our economic meltdown. It took a dive because there are crooks who manipulate the market, and there is nothing an average investor can do about it but sit back and take the hit. Here's what happened to Apple's stock. Worst of all? In after hours trading, the price jumped back up to $204. Who wants to bet it will open in the $210-215 range tomorrow?
Now some will say that this is just the way it works and why it is risky to be in the stock market. Uh, no. This is the same reason it's risky to get involved in the mafia, because you're dealing with dishonest people who are willing to change their minds and kill you at a moment's notice.
I was talking to a day-trading buddy of mine a while back and he suggested a better use for my $10,000 than investing in the market. He thought I should use it to take as many people out for coffee as possible until I find one of them to hire me for lots of money. It was sort of tongue and cheek, but only sort of.
To be honest, I might still try to pick up some Apple shares in pre-hours trading on Monday. Despite the crooks who screwed average investors like me on Friday, I think it's obvious that Apple is a solid company. Moreover, I think that over the next few years their Tablet will do for publishing what the iPhone did for communications and music. (Not that I'm all happy about what happened. There are some negative consequences. But you cannot deny that the iPhone created the new way in which these industries work.)
But my sense is this. If we adults want to put some investment money to good use, and if we want to teach our children to do the same, it's probably best to start with a lemonade stand on a hot summer day.