Early to Rise: A Young Adult’s Guide to Saving, Investing and Financial Decisions that Can Shape Your Life

227 Pages·2005·0.74 MB·English

by  Stahl M.Z.

EARLY TO
RI$E
A
Young Adult’s
Guide to
Saving,
Investing
And Financial
Decisions That
Can Shape
Your Life
MICHAEL Z.
STAHL
S L P
ILVER AKE UBLISHING
LOS ANGELES, CA (cid:138)(cid:138)(cid:138)(cid:138)(cid:138) ABERDEEN, WA
Early to Rise
A Young Adult’s Guide to Saving, Investing and Financial Decisions that
Can Shape Your Life
Second edition, 2005
Copyright © 2005 by Michael Z. Stahl
Silver Lake Publishing
111 East Wishkah Street
Aberdeen, WA 98520
For a list of other publications or for more information, please call
1.360.532.5758. Find our Web site at www.silverlakepub.com.
All rights reserved. No part of this book may be reproduced, stored in a
retrieval system or transcribed in any form or by any means (electronic,
mechanical, photocopy, recording or otherwise) without the prior written
permission of Silver Lake Publishing.
Library of Congress Catalogue Number: Pending
Stahl, Michael Z.
Early to Rise
A Young Adult’s Guide to Saving, Investing and Financial Decisions that
Can Shape Your Life
Includes index.
Pages: 226
ISBN: 1-56343-812-7
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Thanks to my family, whose invaluable support helped me achieve
this goal and especially to my Grandfather Zaharia, who, as I sat on
his knee, faithfully turned from Sesame Street to the stock ticker ev-
ery afternoon and who always kept stock charts around for easy read-
ing. I am sure he is smiling proudly as he looks down on me from
above.
Michael Stahl
Minneapolis, MN
May 2005
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Introduction:
Why Now?.......................................................................7
Chapter 1:
Develop an Investor’s Mentality ....................................... 11
Chapter 2:
Basic Money Management ................................................ 27
Chapter 3:
Evolution of the Teen Investor ...........................................37
Chapter 4:
Stocks…What Are They? ................................................. 47
Chapter 5:
How to Use Stocks ........................................................... 61
Chapter 6:
Using Youth to Your Advantage ......................................... 75
Chapter 7:
Getting Comfortable with the Market.................................. 85
Chapter 8:
Mutual Funds 101 ............................................................ 103
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Chapter 9:
Investment Clubs .............................................................. 117
Chapter 10:
Operating an Investment Club .............................................. 145
Chapter 11:
Stalking Winners ............................................................... 161
Chapter 12:
Dumping Losers ................................................................ 175
Conclusion: .......................................................................... 189
Appendix A: Simple Stock Worksheet ................................ 193
Appendix B: Internet Resources ............................................ 195
Appendix C: Web Sites for Young Investors ......................... 197
Appendix D: Media Databases .............................................. 199
Appendix E: Financial Magazines & Journals.......................... 201
Appendix F: Stock Brokers, etc. ........................................ 203
Appendix G: Discussion Groups & Chatrooms ....................205
Appendix H: Government Agencies & Regulators ................. 207
Appendix I: Useful Books ................................................... 209
Appendix J: When to Buy.......................................................213
Appendix K: When to Sell......................................................215
Glossary ................................................................................ 217
Index ................................................................................ 221
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As a young adult in America, you may have already realized that,
while money doesn’t buy happiness, it can sure help. I believe that
over the long term investing is the most effective way to fundamentally
improve your future. Investing is the most important avenue for you to
increase your personal net worth through the proper allocation of
whatever money you have—or will have in the future. As a young
adult, you are entering a time when you will spend and save more
money than you would believe possible.
Think big!
Why Should You Invest and Why Now?
By investing early and wisely you may achieve lofty goals-the sports
car, the yacht, the French chatêau. You may want a few thousand
dollars (or many thousand) to help finance your college education.
You may want to spend the day sitting in a café in Paris or take an
African safari before you turn 30. You may want to retire in a big
mansion on the Florida intracoastal with large Roman pillars in the
entry way and a retractable roof over your bed so you can see the
stars at night. Wait a minute—that’s my dream and I have first dibs on
it. So stick to the Paris café.
The point is: You will be living on your own and paying the bills
soon. And, it would be nice to have a large amount of savings to help
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you through the first years of the real world—of rent, insurance, utili-
ties, cable TV, etc. Maybe you are still a few years away from those
expenses, but the earlier you begin investing (and saving) the easier it
will be to finance your future.
Investing in stocks or stock funds is the best way to increase your
financial resources. Costs for teenage necessities these days are rising
rapidly. A new (to you, possibly used to the world) car will run you
more than $10,000; four years at college can cost you $35,000 for
public, or more than $100,000 for private; a laptop computer has a
price tag in excess of $1,000. And the list goes on and on.
Parents may not have the extra cash to buy their wonderful,
caring teenagers everything that they need or want. Invest-
ing can be a way to solve this dilemma.
Many of us probably don’t remember the first time we were aware
of money and its purpose. Or the fact that you can use money to
invest and make more money. I first learned about markets (the
money—not food—kind) as an elementary school kid when my
grandpa faithfully placed me on his lap and watched the Financial
News Network, the predecessor to CNBC.
Perched on his knee, I intently watched the stock ticker flash by
in blips of meaningless letters and numbers. Stock charts and com-
pany profiles were always left around the house, and if anybody taught
me how to put my weekly $1.05 allowance to good use, it was my
grandpa. Even today, he is still my greatest influence in the investing
world. The lessons I have learned from him have brought me to ap-
preciate all that investing has to offer—when done with diligence and
shrewdness.
Investing not only has its financial rewards, but it is enjoyable at
the same time. It is fascinating to conduct research on the billions of
dollars a company has, or to look at your collection of stocks, com-
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monly referred to as a portfolio, and think, “I own a piece of these
great companies!”
I invested in my first mutual fund when I was learning how to write
a research paper—in the fifth grade. One of the companies in my
mutual fund’s portfolio was PepsiCo. So, during this period, I urged
my mother to purchase Diet Pepsi instead of Diet Coke. Why wouldn’t
I indirectly contribute to my investment? It’s exciting—gets me feeling
like I own a little piece of the world.
Which brings me to another interesting point about investing:
Through stock ownership you are a part of something larger. As a
part owner of the company, you can help guide the company’s opera-
tions through voting on shareholder proposals and electing the board
of directors.
You can also attend the company’s annual meeting which
gives you the opportunity to step up to one of the many mi-
crophones placed around the room and ask the big boys—the
CEOs, the money men—a tough question and watch them
attempt to please you. How many times will a person, whose
net worth dances somewhere in the nine or 10 figures, be
eating out of the palm of your hand?
Investing Is Fun
There’s some fun involved too. My investment club experienced
this for many years when we attended an AMC Theatres annual meeting
each December while in high school. We watched a free yet-to-be-
released movie at the company’s premier movie complex. We en-
joyed a free lunch and enough popcorn and Reese’s peanut butter
cups to tide us over until the summer.
These are some of the perks of working a capitalist economy to
your advantage.
Besides, what can be better than doing a little research and watch-
ing your money grow and work for you? It’s great to come home, flip
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