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    Teaching Kids to Buy Stocks: Stories and Lessons for Grown-Ups
    Teaching Kids to Buy Stocks: Stories and Lessons for Grown-Ups
    Teaching Kids to Buy Stocks: Stories and Lessons for Grown-Ups
    Ebook289 pages2 hours

    Teaching Kids to Buy Stocks: Stories and Lessons for Grown-Ups

    By J. J. Wenrich

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    About this ebook

    It really does take a village!

    If today’s youth are tomorrow’s future, we the village need to properly equip ourselves in order to equip our youth for success.

    That means not only parents but
    - grandparents
    - aunts and uncles
    - teachers
    - friends
    - neighbors... You get the picture. This book seeks to educate the general population in a way that can be passed on to younger generations for years to come. It’s adulting for all ages!
    J.J. will walk you through how he encouraged his three kids to save birthday and allowance money, then use a portion to buy stocks. You will learn the same lessons he taught his kids at home, and thousands of financial professionals at work.
    It’s OK if you know nothing about stocks, he’s here to help fix that. This book simplifies the stock market and stock picking in a way that anyone can understand and teach. If you can understand the business concepts behind a lemonade stand, you’ll be able to understand these basics and teach them by the end of the book.

    No matter where you are in your investing life, you are sure to find this book to be both entertaining and educational.

    LanguageEnglish
    PublisherJ. J. Wenrich
    Release dateMay 28, 2019
    ISBN9781733797719
    Teaching Kids to Buy Stocks: Stories and Lessons for Grown-Ups
    Author

    J. J. Wenrich

    J. J. Wenrich is a Certified Financial Planner and 20-year veteran of the investment world. He developed his fascination with the stock market as a child, watching business reports on PBS, one of the few stations available in his small-town Kansas home. During freezing winters and blazing summers, he was inside learning about what he calls “the amazing world of stocks.” Despite his small-town upbringing, J.J. had progressive teachers along the way who included personal finance education and stock-picking games in their curriculum.His professors at The University of Kansas reinforced his love of the stock market. So much that he spent spring break on campus watching CNBC all night with stock charts and spreadsheets as he followed equity markets around the world.Since then, he met his wife Jodie—also a financial professional at the time—and together they built a family “portfolio” including Jodie’s son and another three children born within 30 months. This family is the foundation of J.J.’s lessons on educating kids (and grown-ups) about healthy financial habits and Teaching Kids to Buy Stocks.J. J. also runs a financial coaching practice, Dollars and Zen.

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      Book preview

      Teaching Kids to Buy Stocks - J. J. Wenrich

      Teaching Kids

      to Buy Stocks

      Stories and Lessons for Grown-Ups

      J. J. Wenrich CFP®

      Teaching Kids to Buy Stocks

      Copyright @ 2019 by J.J. Wenrich

      All rights reserved. Printed in the United States of America. No part of this book may be used or reproduced in any manner whatsoever without written permission from the publisher, except in the case of brief quotations in critical reviews and articles.

      First Edition: May 2019

      Library of Congress Control Number: 2019903140

      ISBN, Hard Cover: 978-1-7337977-0-2

      ISBN, Paperback: 978-1-7337977-2-6

      ISBN, eBook: 978-1-7337977-1-9

      Cover art design: Dave Baldwin and Allyson Cheney

      Editing and Interior: Bruce Rowe

      Published by Hopeful Hill Press

      PO Box 73221

      San Clemente, California 92673

      www.hopefulhillpress.com

      Books may be purchased in bulk for education, promotional, and business purposes from your bookseller or by writing to Hopeful Hill Press.

      The material in this book is written for informational purposes only. The material is of broad scope and general in nature and is not designed to cover every individual circumstance. It is offered and presented with the understanding that the author is not rendering professional, financial, or legal advice. This material is not intended as a solicitation or offer for advice or the purchase or sale of any financial instrument. Local, state, federal and international laws vary regarding offering, soliciting, and providing financial or legal advice, if advice or expertise is necessary the reader should seek the services of a professional. The author specifically disclaims any liability that could result from implementing the ideas, practices, and methods described in the contents of this book.

      This ebook is licensed for your personal enjoyment only. This ebook may not be re-sold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each recipient. If you’re reading this book and did not purchase it, or it was not purchased for your use only, then please return to your favorite ebook retailer and purchase your own copy. Thank you for respecting the hard work of this author.

      To my friends and family. Thank you for the love and support, even if you had no idea what I was talking about.

      To the professionals who shared a conversation with me. Thank you for taking time out of your day.

      To Jodie. There are no words. Thank you for loving me.

      Contents

      Introduction

      1| A Little About Me and My Family

      Out of necessity

      Thanks Mrs. Brown

      Two Decades in investments and financial planning

      The family grows

      2 | The $500 Challenge: A Bait and Switch

      3 | The Annual Stock Market Game

      Contest results

      4 | Welcome to the Shark Tank

      5 | Talk To Your Kids About Money

      Chores and allowance

      Teaching with chores

      TCB

      I grind, you grind

      Help kids find the entrepreneur within

      Share. Save. Spend.

      Business is happening all around you

      6 | The Most Powerful Force

      Getting started

      Fit people smiling

      From interest to dividends

      The Rule of 72

      Inflation

      7 | The Most Important Rule in Investing

      8 | Intro to Investing: Money Trees

      Risk and Reward

      Cash is cash

      Bonds are loans

      Types of bonds

      A typical bond issue example

      Current Yield

      Pricing of bonds

      9 | Basics of Stocks 101: The Lemonade Stand

      Publicly traded

      Lemonade Inc.

      The quote

      More quote screen info

      10 | Basics of Stocks 201: Simplifying Key Concepts

      Earnings aka Profits

      Earnings = Sales - Expenses

      Earnings per Share = Total earnings ÷ Total shares

      Dividends and Retained Earnings

      Dividend Yield = Dividend per share ÷ Share price

      The Rosetta Stone of Financial Ratios

      Applying the PE ratio

      Comparing PE ratios

      Chapter 10 review

      11 | Intro to Stock Picking 301: Story, Numbers, Expectations

      12 | Intro to Stock Picking 335: What’s the Story?

      Stocks are businesses

      The Line out the door factor

      Are your companies publicly traded?

      Always be looking around the corner

      Stocks follow earnings

      13 | Stock Picking 355: Numbers

      Numbers keep you grounded

      Earnings

      The direction of earnings

      Dividends

      The direction of dividends

      The PE ratio

      The direction of PE

      The Balance Sheet

      Thoughts on debt

      Summarizing the numbers

      14 | Stock Picking 375: Expectations

      Direction: Predicting the future

      Recency bias

      Story and Number Expectations

      Where could I be wrong or right?

      Know your stock

      One More Thing

      Timing the Market

      Stock Charts

      Think about the chart

      Trading vs. Investing

      Discipline

      15 | Stock Picking 425: Buy, Hold or Sell?

      Using the process

      When to buy

      Be systematic

      Look for sales

      The Psychology of Gains and Losses

      Don’t freak out, man

      When your stock drops

      What’s changed besides the stock price?

      Don’t throw good money after bad

      Bulls and Bears

      Earnings season

      When it goes up

      Sell half

      16 | Mutual Funds and ETFs

      Individual stocks vs. Funds

      17 | History: Lessons Learned From Business

      Choosing stocks with kids

      Netflix vs. Disney

      Always be looking around the corner

      Nintendo

      Line out the door stocks

      Starbucks

      Chipotle

      Southwest Airlines vs. United Airlines

      FAANG

      Facebook

      Amazon

      Apple

      Netflix

      Google (Alphabet)

      18 | Show & Tell: A Little Wisdom From Kids

      Glossary

      Appendix

      A. Quick and Simple Financial Planning Checklist

      B. Excel Commands from Chapter 6

      Thanks to these sites

      About the Author

      Introduction

      To many people, the stock market can seem like a mysterious creature, lurking in the shadows of Wall Street. To others, their understanding is at such a brainiac level that they really are speaking a different language than 99 percent of the population. Most of us fall somewhere in between.

      If you don’t know anything about stocks, this book will help fix that without overwhelming you with nerd words and without making you call yourself a dummie. I use examples and analogies that anyone can relate to.

      Maybe you know a thing or two about the market—you have mutual funds and a 401(k)—but are unsure about buying individual stocks. This book will help you become more comfortable with pulling the buy trigger on your first stock.

      No matter your understanding, this book will help educate you about the stock market as well as entertain you along the way. I will tell you the same stories I’ve told to both kids and professionals—as well as professionals who act like kids—over my 20-year career in the investment business.

      If the stock market seems too big and complex to you, then follow along as I show you how I taught the basics to my kids. Over the course of several years, I was able to help them understand the fundamentals of long-term, buy-and-hold investing in individual stocks.

      I’ll walk you through how I encouraged my three kids to save their birthday and allowance money, then use a portion of that money to buy stocks. You’ll learn the lessons I’ve tried to teach both my kids, and thousands of financial professionals over the past 20 years. No matter where you are in your investing life, I think you’ll find this book enjoyable and entertaining.

      The basics are, well…basic

      In my opinion, the basics of investing are not terribly complicated. Don’t get me wrong, it can become complicated very quickly. Investment people love to make things sound more complex than they really are. They love to make a new word for things that already have words. Words like hedge and long and short and it will have nothing do with bushes or length. It can seem incomprehensible to outsiders, while to insiders, they don’t realize they’re speaking another language.

      In my career, I’ve found myself giving hundreds of speeches on what’s going on in the stock market to folks who don’t speak the language. I’ve found myself being the information conduit between brainiac investor nerds and regular, everyday people. A large part of my career has also involved teaching financial professionals; in essence, teaching them the language.

      Along the way, I’ve also taught my three kids how to buy their first stocks. First, I taught them to save their cash into a savings account. Then, while they were saving cash, I taught them the principles of investing in stocks. I use the same teaching process with adults. I will guide you through that process in this book.

      I’ve been able to do this by simplifying the concepts to a level that even a kid can understand. I began talking to my children about investing and buying stocks when they were ages three, four, and five. I was able to teach them things in slow steps, as part of our everyday conversations.

      I was amazed at how well they could understand basic concepts of business and investing. At such a young age, they aren’t clouded by bias and have no lessons to unlearn. The things my kids said blew my mind. I found myself quoting those most profound statements at presentations in front of hundreds of people.

      For me, it is surreal sitting on a stage in front of 200 investors, next to a portfolio manager who manages a $5 billion fund, quoting your 10-year-old son about what dividends mean to a long-term investor.

      I’ve also learned a great deal by asking fellow investment professionals about their conversations with their children. I’ve had the luxury of being able to casually interview moms and dads while we talk about the markets. I typically ask anyone who has kids, Do you talk to your kids about stocks? I get some great answers, and it helps spark a conversation.

      In the course of my job working with investment and financial planning professionals, I’ve also shared my successes in teaching my kids to buy stocks. I’ve seen some professionals I meet become inspired by my story and begin to teach their kids. In fact, one of those conversations led me to write this book.

      Now, let’s get going. Read on and you will find the lessons I’ve taught my kids, as well as some of the best lessons I’ve heard from others.

      1 | A Little About Me and My Family

      I grew up in a town of about 100 people outside Wichita, Kansas. Although the big city of Wichita was nearby, I was far removed from Wall Street in my rural town.

      At home, we really didn’t discuss the stock market. My dad talked once or twice about a couple of stocks he said he owned, and my mom said she had some retirement accounts, but that was the extent of it. My mom did help me open a checking account in sixth grade, and even taught me how to reconcile it.

      I was fortunate to go to great public schools where we were taught several aspects of business and personal finance. I am so thankful that I had such progressive and engaged teachers in the small towns that made up our rural community.

      Out of necessity…

      Out in the country, we didn’t have cable. We had four channels, one of which was PBS. In Kansas, it’s cold in the winter, it rains all spring, and it’s 100 degrees and humid all summer. I was inside watching TV more than I should have been and I watched the news a lot as a kid. From 5:00 to 6:30 p.m. there was NOTHING ON except for news.

      From all that news watching, I became very curious about the stock market, and fascinated by how many stocks there were.

      Now’s a good time for a first lesson to help you understand the following paragraph.

      Nerd Word Alert

      Stock (Ticker) Symbol: An abbreviation used to identify shares of a particular company traded on a stock market. Ticker is a remnant of a time when stock quotes were transmitted using a dedicated stock ticker machine that typed out prices on a moving paper tape.

      Each company stock has its own set of letters that act as a symbol or code to represent it, similar to how an element on the periodic table has its own symbol. Some are logical, some are not. For example, the symbol for Apple is AAPL. Makes sense, right? The AT&T ticker symbol is T. That’s a little tougher. Southwest Airline’s ticker symbol is LUV—you need to know a little about the company to understand that one.

      I was always amazed that there were people who could just name symbol after symbol like it was nothing. All these years later…I’m one of those people.

      Before computers, you would read the stock quotes in the newspaper and they were listed alphabetically by ticker symbol. If you didn’t know that T meant AT&T, it could be difficult to find your stock. Today you can just ask Siri or Alexa.

      Thanks Mrs. Brown

      Maybe one of the most important days of my childhood came in seventh grade. At the

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