Streetwise

Lauren Rudd

Sunday, December 25, 2011

The Most Wonderful Time of the Year

It is the most wonderful time of the year...although probably not for the millions of unemployed...or the more than one million homeowners who are in foreclosure. Oh, there is also that small problem of those without adequate health insurance, or any health insurance.

To make matters worse, Congress has decided to once again take on the persona of Scrooge, as it continues to allow partisanship and parliamentary procedures to create a dysfunctional environment deprived of all rationality. Nevertheless, this is the holiday season and as critical as those issues are to our country’s future, they are of a macro nature. On a more micro level is your personal investment strategy.

Now to the uninitiated investor, Wall Street was no walk in the park this year. However, and don’t spill your eggnog, but Wall Street is, and always will be, the place to be if you want to increase your wealth. Additionally, there is no “good time,” or “bad time,” to invest. It is the methodology with which you allocate your investment resources and the quality of what you invest in that determines your level of success.

As has been discussed here many times, anyone can successfully establish and maintain a profitable portfolio. And you can do it without the espoused professional assistance, the myriad of newsletters, books, charts and the never ending series of free meal seminars that are so often hawked. To say you cannot is an excuse, not a reason.

But there is another side to investing. As you sit back, eggnog in hand, take a moment to ask yourself this question...have you have ever helped a child, teenager, or maybe even an adult learn some investment fundamentals? It is never too early or too late to introduce someone to the benefits of equity investing.

I mention this idea every year not because of the avalanche of email I receive requesting that I do, but because the discipline of investing will of necessity play an ever increasing role in determining a person’s future financial security and well-being.

For example, you cannot do better for a young child than with a gift of a few shares of Disney. Whether Disney is the most sanguine investment is not relevant. What is important is that you obtain the actual stock certificate, which you can then frame and hang in a place where the recipient can view it regularly.

Decorated with Disney characters, the certificate is almost a piece of art. Besides, how many pictures can your child hang on the wall that will increase in value?

For those family members who are too old for the Mouse and crave a more exciting life, there are companies such as Apple, Microsoft, Adobe, Intel, Cisco and Hewlett-Packard that will likely raise the level investment interest in most teenagers.

If video games are more to their liking then companies such as Electronic Arts, Take-Two Interactive Software, Activision Blizzard and THQ become candidates. Some of those companies, such as THQ, have not done all that well recently but your kids probably know that better than you. They are also likely to be informed as to what the future bodes for gaming software houses. Finally, an enterprising teenager might even uncover a lesser known name that is ready to outperform its brethren.

So how do you go about setting up an account for your soon-to-be Wall Street prodigy? The shares should be in a deep discount brokerage account that can be viewed on demand via the Internet. At the same time you want to maintain the degree of supervision and restriction on both trading and the withdrawal of funds that you deem necessary.

Ideally, you want to instill the idea of investing as opposed to trading. Yet, if your budding analyst can make a case for moving out of one stock and into another, go along with the idea. Learning should take precedence over possible returns.

Finally, let your young investor go it alone. Try out your ideas on your portfolio. The more a young person can learn about investing and investment research, the greater the likelihood that they will be able to establish themselves on a sound financial footing in their adult life.

Lauren Rudd is a financial writer and columnist. You can write to him at LVERudd@aol.com. Phone calls accepted between 9 AM and 3 PM at (941) 346-5444.