Please help my son...very basic question

[Scorpion Man]

I want to teach my 9 year old kid to invest in stocks...he has a substantial portfolio that he does not know about...but I want him to "control" and focus on an account with only his own money and a little that we will give him...this will be maybe $500 total and growing slowly over time.

Where is the best place to do this? the problem with the places i would like to use like etrade and ameritrade is that even $10 is brutal even if he is only investing in 2-3 stocks.

Should I use a free site? Are there any big drawbacks on these sites?

Thx

[Big TR]

This is kind of an alternative suggestion. I'm going to assume that you have the means to pay him his profits in this endeavor.

First, set up an portfolio tracking account for him at Marketwatch or something like that with $500. Allow him to make "trades" in stocks that he wants. Revalue his portfolio every quarter and move the money that he makes (or loses) into or out of the $500.

[gull]

By a free site, do you mean Zecco.com? Are there other free sites?

A 9-year-old kid cannot expect to beat the average dollar traded. If he's smart, he'll minimize transaction costs and put it in a single index fund or ETF.

[RedJoker]

[ QUOTE ]
A 9-year-old kid cannot expect to beat the average dollar traded. If he's smart, he'll minimize transaction costs and put it in a single index fund or ETF.

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gull, you are priceless. [img]/images/graemlins/smile.gif[/img]

[pig4bill]

And relentless.

[Scorpion Man]

[ QUOTE ]
This is kind of an alternative suggestion. I'm going to assume that you have the means to pay him his profits in this endeavor.

First, set up an portfolio tracking account for him at Marketwatch or something like that with $500. Allow him to make "trades" in stocks that he wants. Revalue his portfolio every quarter and move the money that he makes (or loses) into or out of the $500.

[/ QUOTE ]

Very interesting suggestion...I will consider. There is something I really like about doing it for real, though...it would involve taking some money out of his bank account...paying taxes on gains, etc.

I was given a stock when I was very young (5 shrs @ $8) and it ultimately led to what I did for a living. He is extremely interested and very intuitive about it..

And he will only beat the market if consumer goods on kids radar screen outperform...current candidates are Nintendo, Disney, Apple, Sony and Google. But the experience will be, as Mastercard, says...well you know the rest.

[moondogg]

You're really going to make him sit down and read SEC filings?

[Big TR]

[ QUOTE ]
Very interesting suggestion...I will consider. There is something I really like about doing it for real, though...it would involve taking some money out of his bank account...paying taxes on gains, etc.

[/ QUOTE ]

I agree that doing it for real would be better. But with such a small amount, I think you acting as your son's market and taxation authority will get the point across.

[pig4bill]

Nah, get him an Interactive Brokers account or something like it. Otherwise he will be afraid to make a trade that doesn't meet your approval.

[Scorpion Man]

[ QUOTE ]
You're really going to make him sit down and read SEC filings?

[/ QUOTE ]

A little bit...he will read business description. I will go over some very basic financial statement stuff...sales, margins, earnings per share (he already gets this..its amazing what lemonade stand and pizza slice analogies can convey). Cash and or debt on the balance sheet.

I also want him to understand the concept of valuation. Yesterday he started to understand what you would pay for a stream of cash flows (what would you pay for $1 each yr for 10 yrs?).

No, I am not sick and twisted, as you might think. He has a very balanced life and is very focused on sports...he actually requested a stock as his holiday present this year. I said terrific, but let's do it right.