Here are some ideas to help your child choose some investments:
- Pick a product your child likes. It may be a favorite toy or food or athletic equipment. When my daughter, Allison, was ready to buy her first share of stock, we zeroed in on her interest in puppies and chose to invest in PetSmart. Our ability to link her first stock purchase with something she loved and a place she could visit made investing come alive for her.
- Research the company. Help your child look up the annual report online or at your local library. How does the company earn money? Is it profitable, and why? Does this company plan to grow bigger and better? Search the Web for news reports and the company’s Web site as well as that of any competitors. With whom does this company compete? Is your company better than the competition?
- Determine how you’ll keep track of the company performance. Tracking the performance of the company and how the stock price responds to the ups and downs is an important part of learning how the stock market works.
The point of this initial foray into the stock market is to learn how to buy and sell a stock, not necessarily to make money. So don’t worry about whether your child picks a dud. Just worry about whether he or she has learned the mechanics of the market-and the long-term vision needed to be an investor.