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Thursday, April 12, 2012

Teach Your Kids About Stocks - Taking the Plunge

A client called the other day and said their son, who is in his late 20s, wanted to start investing.  After ascertaining he wasn't in a high tax bracket, I recommended $5,000 in a Roth IRA.  It was made clear that he may need the money before he hits his late 50s.

I recommended he go to and click "open an account."  All he had to do was fill out the application and send a check in.  I prefer Schwab, but any discount broker would do.  I also asked if he had an idea of how he wanted to invest the money.  He didn't; but, if he did, he would need to find ticker symbols of stocks he was interested in, etc.

I then directed him down the path I prefer--low-cost, well diversified exchange traded funds.  I suggested SCHB, a commission-free fund for Schwab clients that tracks the broad stock market.  I recommended that, unless he wanted to drive himself nuts, he check on the fund infrequently. I noted that the stock market would go up and down, but what he was interested in was where the market is years from now.

To carry out this recommendation, he had to click on the "Trade" tab.  That took him to the module where he entered the ticker (SCHB), the number of shares ($5,000/price of SCHB), and the circle that directed the buy to be made at "the market."  He then clicked "Review Order."  The next page allowed him to review the order.  He then just clicked the button to get it to go through.

Source: Schwab

At the bottom of each Schwab site is a quote box. Right now SCHB is $33.28/share, so with $5,000 he could bought 150 shares.

That's it.  He's in; and, as I told him, "...20 years from now you will look back and see it was one of the best things you ever did."

Nothing takes you up the learning curve like getting involved.


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