Investing for 16 year old daughter

[billyjoe]

Mr.Market Forum Readers,
My 16 year old daughter has been bugging me to buy her some stock for a couple years now and by cashing in some savings bonds and birthday checks from Grammaw, she now has a trading account of $750. While we don't want to gamble it away on a highly speculative stock, she also doesn't want to be bored watching a return similar to her bank savings account. What would you do? All suggestions will be considered.

p.s. she is an expert shopper and gladly tells me her opinion on what styles of clothing and companies are "in" or "out". AEOS and ANF are her current favorites.
billyjoe

[ridemhigher]

Sounds like the Peter Lynch investment philosophy, buy where you spend your money. The only caveat to this idea is that you may end up spending more dollars in clothing costs than you are spending on the investment.

[Karel]

The wish not to be bored and a $750 account look like an extremely unhappy combination.

[billyjoe]

ridemhigher,
I had to get the $ away from her control before it was converted to jeans or whatever she "needed". It would have disappeared quickly.
billyjoe

[spikefader]

Mr.Market Forum Readers,
My 16 year old daughter has been bugging me to buy her some stock for a couple years now and by cashing in some savings bonds and birthday checks from Grammaw, she now has a trading account of $750. While we don't want to gamble it away on a highly speculative stock, she also doesn't want to be bored watching a return similar to her bank savings account. What would you do? All suggestions will be considered.

p.s. she is an expert shopper and gladly tells me her opinion on what styles of clothing and companies are "in" or "out". AEOS and ANF are her current favorites.
billyjoe

Out of the money QQQQ leap call options is what I'd do. Sell them when the bigger 5th wave completes late next year.

[MEA_1956]

CLE === If she is interested in out fitting.
AEOS === Has reached a plateau. I'm thinking of dropping this one.
KSS === Is going to be my next major department store. It is suppose to have alot of room to grow.
URBN === Is one that had caught my daughters eye when ever I receive a sells ad. Lots of ooooo & aaaaaah and once in awhile a how cool.
===> M.E.A.

[scifos]

Mr.Market Forum Readers,
My 16 year old daughter has been bugging me to buy her some stock for a couple years now and by cashing in some savings bonds and birthday checks from Grammaw, she now has a trading account of $750. While we don't want to gamble it away on a highly speculative stock, she also doesn't want to be bored watching a return similar to her bank savings account. What would you do? All suggestions will be considered.

p.s. she is an expert shopper and gladly tells me her opinion on what styles of clothing and companies are "in" or "out". AEOS and ANF are her current favorites.
billyjoe

I had some ANF a few weeks ago, did well for me then, but haven't been following it since so I don't know what its prospects are now.

It seems like it will be hard to safely invest 750 without it being boring. But out of the money call leaps on the QQQQ sound pretty exciting, but aren't options pretty risky too spike?

I guess I have no recommendations, I'm on vacation right now and am not watching the market much or doing any stock research/screening.

[spikefader]

It seems like it will be hard to safely invest 750 without it being boring. But out of the money call leaps on the QQQQ sound pretty exciting, but aren't options pretty risky too spike?

Yes, you are entirely correct. Options are risky. But you've got to understand the risk. If someone only has a small sum of money they want to use for a long-term investment, and wishes to avoid boredom, then options CAN be a great way to maximize profits if your pick is a winner. If you time well, your small capital can really grow quickly. And if you're bullish on the market, leap calls are a great way to dip your toe without getting overexposed.

Leaps are arguably less risky since you have more time on your side to be right. The good thing about options are that you have limited downside. You will only lose the price of the option/s you buy. So worst case scenario and the market tanks big time, although it might be 100% loss on the options, financially, it's not a devastating capital loss.

As long as you understand the risk, and your tolerance can accept it, then go for it. Otherwise, pass on them, and stick the capital into something more safe, secure and boring

[billyjoe]

Bought her 24 shares of OFG. The excitement will be upcoming dividends.
billyjoe

[spikefader]

Bought her 24 shares of OFG. The excitement will be upcoming dividends.
billyjoe

Good luck. Why OFG. I can't wait to see Webs' enthusiasm about that stock

Just for entertainment and educational purposes, the QQQQ leap Jan '06 45s strike puts are going for 1.50 ($750/1.50 is 5, so say we pick up 5 of these leaps).

Let's see where that price is at the end of the expected 5 waves of the bull. Billyjoe, remind us how OFG goes in a year will ya? We'll see if the market (and these options) outperform OFG or not. I'd be interested to see how much of the premium of those puts disappears from the investment.

[Websman]

I think OFG sucks...but that's only because I lost money on it...lol

It's cool that your daughter is interested in investing. Most 16 year olds are more concerned more about spending money than making it. She may be a very wealthy girl one day!

[IIC]

This is a more general response for anyone who will be a long term investor and doesn't want to spend a million hours watching the market...DRIPs. This stands for dividend reinvestment program.

When my son was born in 1980 and again on his first birthday my father gave him shares of Colgate. They automatically reinvest the dividends in commission free shares. The idea is that you continually add your own money over the years. Unforunately we never did...but with the reinvested dividends my son averaged over 25% per year...he had a very nice sum after 18 years.

One nice thing about this is that you can easily gradually sell shares too. Also, there are no "surprise" capital distributions at year-end like mutual funds. Of course, you are putting all your eggs in one basket so it is important to pick a solid company. But you can sell at anytime and you could also do this with more than one company to limit risk...Just a thought.

http://www.fool.com/school/13steps/13steps05.htm

http://www.fool.com/school/drips.htm

I'm not really familiiar with this company...but they have quite a bit of info for these types of investments:

http://www2.netstockdirect.com/index.asp?redir=0

Just click around their site for a little overview of DRIPS, Direct Investing...etc...

[Dave]

Another type of stock to consider is a REIT (Real Estate Investment Trust), such as NEW or NFI. They pay all, or almost all their earnings out in huge dividends. NEW should end up paying out like $9.00/share in 2005, and the stock is currently around $60.00. I had an investment club with some friends from college and we put some cash in a few DRIPS and it turned out well, but nothing like 25%/year, thats nice!!!

-Dave

[skiracer]

Here's two that are relatively safe and both are sporting MSN Money's highest rating of 10. NOVA and NICK. Both have been trending up the last couple of weeks and pulled back some today. It's a decent time to grab both. Both are experiencing constricting of their bollinger bands at the present which can lead to either a bounce up or down but the pattern with these two has been up under these circumstances. Expecting both to continue their quiet trends up.

[Karel]

Mr.Market Forum Readers,
My 16 year old daughter has been bugging me to buy her some stock ....

p.s. she is an expert shopper and gladly tells me her opinion on what styles of clothing and companies are "in" or "out". AEOS and ANF are her current favorites.
billyjoe

I have been thinking about this and done a little searching. This is one of the things I found. In other words: why should you buy the stocks. OK, you already did, no problem. But get her involved. What does she want? What does she know? What is she prepared to learn? Or are you just buying her a carnival ride? This might be a good opportunity for some education, if she really is motivated, and not just in it for the excitement. Since her capital is small and smallness works against you in investing, perhaps she could try to interest friends and start an investment club. Of course, in an ideal world, they would start with some supervision from a responsible, knowledgeable and experienced parent (=you).

And what is "hot" in fashion can be "out" the next moment, taking a stock with it.

Regards,

Karel