No. of Recommendations: 15
Are you seriously telling young people in their wealth-building years to wait 14 years before adding to an index fund?
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I'm seriously suggesting that EVERYONE should look at the price of what they're buying, investments or hamburgers.
I see validity in both, depending on where the individual is on their investing learning path. I look at this with respect to my own path.
I was born in 1978 and for as early as I can remember I had a red passbook savings account and US savings bonds my grandmother gave to me for every birthday and Christmas. I'm sure there were many dates along those early years where my meager balance could have been more optimally deployed but it was the educational experience of saving and delayed gratification that was valuable at a young age.
My grandparents were 'dirt poor' farmers but they were determined to provide the opportunity for each of their grandchildren to learn the value of investing (as they had learned from one of my grandfather's uncles). At the age of 13 every grandchild was setup with an IRA of which they funded half of the yearly maximum until the age of 21. My account was opened in 1991 and I believe it was originally with Invesco in the American Fund with an insane 5.0% front end load. I mowed lawns and did other jobs around the farm to fund my other half to the max. Once again the educational experience, being exposed to investing, was the value because it led me to reading and learning. I wasn't ready for the deeper exploration into valuation but habits were forming.
By the time of the dot com crash in 2000/2001 I was graduating from college, lurking around the Fool and Yahoo boards, and experiencing a loss in my investments that equaled 2-3x my initial yearly starting salary out of college (I recall owning a Putnam tech fund that was the highest return mutual fund in 1999 that subsequently lost over 95% of it's value). Far from optimal, a major setback, but WOW what an education. I wasn't ready to learn about valuing my investments before, but I was now! It still took me over a decade to really grasp the core concepts, and I still have much to learn, but the foundations were set early even with suboptimal guidance.
My oldest will be 13 this year and I plan to carry on the tradition of opening a ROTH IRA for him. I will probably control how the funds are invested (likely BRK to begin with if it's trading at or under median Price to IV, ha!) because, unlike my grandparents, I have a better understanding of what price and value mean but regular contributions from him will be a requirement to begin building the habits. When he's ready to listen to the concepts of valuation (sooner than I was hopefully) we can have that discussion. Even if he wants to invest in meme stocks or crypto at some point I don't think I will stop him. Some lessons in life have to be learned the hard way, but I will do my best to make them as cheap as possible.
Jeff
