Stocks for my Son

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My mother took part in that Ameritrade Suze Orman deal where if she put in $50 a month to a brokerage account for a year then they would give her a $100. She kept it going for a while longer and now she's decided to stop funding it and wants my 4 yr. old son to have the $1400 to invest in stocks. I've moved the money to his custodial account at Sharebuilder and am left with the task of buying a few stocks for my son. So, what should I buy?

My mother has requested some Berkshire Hathaway so we'll do that for sure. Beyond that, I'm not sure. Do I buy locally (KKD, RDK, IBM, GSK) to be able to point out places where he owns a part of the company. Do I buy some bond (JNK) and some dividend producing stock (MO or DUK) to contrast the return in 10 years when he might understand it? Do I just buy SPY and forget it? Just wondering what others have done or would consider doing.

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Although the general advice is to never fall in love with what you're trading, for educational purposes, I do believe it's best to find something that he may do just that: Fall in love with it. If he does, he is more likely to be interested in the general activity of saving and investing, which I assume is the real goal here.

I'm sure there are plenty to choose from, but allow me to throw a couple of specific stock names out there: Hasbro and Disney.

Hasbro has been doing fairly well, especially with their exclusive deal to produce Transformer toys. Also, they are the makers of timeless classics such as Monopoly, Connect4, and Battleship.

Disney isn't just The Other Barbie. Recently, they've acquired the highly lucrative Marvel Entertainment. You know, the guys with the X-Men comics? Iron Man 1 and 2? Upcoming Thor and Avengers? Yeah, that. Plus Steve Jobs' Pixar.

A small child is not likely to grasp the concept of a stock or bond fund. And honestly, even we adults have trouble with that as well. However, when you type in disney.com or hasbro.com, they're going to very quickly understand what they're buying into... or at least their product line.

But that's what I think anyways. In this case, you DO want the investor to get excited and fall in love with what they're buying into. I've read elsewhere that's how some adults today have continued their life-long financial pursuits, because somewhere in the past, their parents bought them a stock or something they got excited about, and they learned about it and tracked it while they're growing up.

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Failed to mention those in my original post. I had read a similar story about hooking in based on buying something they know and understand. Had my parents done this, maybe I would have gotten some Apple back in 1990 along with my IIc.

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Well what purpose do you want to accomplish by purchasing ______?

If a lesson about what it means to own stock, then buy a single company (or 2 or 3).

If a lesson in why to diversify your investments, then buy an index fund.

If a lesson about how to save for the future, then buy a growth stock mutual fund.

If a lesson on how to invest money to increase current income, buy a bond mutual fund / dividend stock.


Until you know why you want to invest, it's hard to know the where.

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I'm not one to waste time overthinking things. I bought 3 BRK.B, 3 DIS, 3 HAS, 6 DUK, 1 AAPL, 2 MCD, 2 XOM, and 2 AMZN (and have a buy order in for 3 RDK). This covers the movies he watches, the toys he plays with, the toys he will play with later, the store where we buy a lot of toys (and books), the electricity he uses to play the toys, the gas we use to drive him places,(potentially) the place where we buy his food, a restaurant we avoid, and a conglomerate. So, I think there will be ample opportunity to talk about investing and companies that he owns a piece of.

Roughly 2/3 of the capital will be generating dividends so we can discuss that piece as it becomes relevant.

Reasonably diversified by sector but expensive from a transaction cost perspective. No biggie though. That's also a lesson for another day.

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I'm not one to waste time overthinking things. I bought 3 BRK.B, 3 DIS, 3 HAS, 6 DUK, 1 AAPL, 2 MCD, 2 XOM, and 2 AMZN (and have a buy order in for 3 RDK). This covers the movies he watches, the toys he plays with, the toys he will play with later, the store where we buy a lot of toys (and books), the electricity he uses to play the toys, the gas we use to drive him places,(potentially) the place where we buy his food, a restaurant we avoid, and a conglomerate. So, I think there will be ample opportunity to talk about investing and companies that he owns a piece of.

Roughly 2/3 of the capital will be generating dividends so we can discuss that piece as it becomes relevant.

Reasonably diversified by sector but expensive from a transaction cost perspective. No biggie though. That's also a lesson for another day.

Sounds like you make some great choices to me. Should be fun to see how those investments pan out over the next 10 years as he (and the stocks you picked) matures. I really regret not having done something similar for my son as a kid. But he's 20 now and finding his own way through the jungle we call life.

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Thanks FHA! It was kind of a fun process. Of course today's drop would've made a better entry point, but I think the time horizon will make it OK. At least it triggered my RDK purchase so all of the stocks are now in the portfolio. A bit more on the story on my blog if anyone is interested.

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Despite the announcement of a massive EU/IMF bailout package, the European debt crisis continues to mount. Although some are saying that we've not seen the last of this general market sell-off, I also doubt that it will reach the kind of lows we've seen with our own credit crisis. In any case, today, my buy limit also triggered, and I decided not to stop it beforehand. So, I bought in as well, and for the moment anyway, I'm sitting in green. I do love a good sale.

But I think what's more important than whether or not a child's portfolio actually makes money is to have it become a teaching tool for your son. Even losses are very educational, more so than gains I think.

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I actually doubled up my Exxon position this morning. Looking back, you couldn't get in at this price for the past 5 years. Maybe it falls further, but it feels like a good entry point to me.