Birthday Bonanza, Part 8 – Summing It All Up!

Good evening, all.

This is the final post in my series outlining how investing $1,000 can set your child up for life.

If you missed any part of this series, or just want to go over it from the beginning, click here.  All the posts are listed from the bottom up.

This last post is meant to serve as an inspiration to you.  It’s a list of real-life investments that your parents could have made that turned your birthday into a true bonanza.

Find the year that you were born, and take a look.  Where would you be today had your parents invested $1000 in the listed stock?

Best Birthday Bonanza Stocks Over the Last 50 Years

Birth Year Stock Initial Investment Total Value, July 2018
1968 Flowers Foods (NYSE: FLO) $1000 $1,250,000
1969 Town Centre Securities (LON: TOWN) $1000 $1,100,000
1970 Walmart (NYSE: WMT) $1000 $11,000,000
1971 Intel (NASDAQ: INTC) $1000 $1,000,000
1972 Southwest Airlines (NYSE: LUV) $1000 $3,000,000
1973 Walgreens (NASDAQ: WBA) $1000 $700,000
1974 Comcast (NASDAQ: CMCSA) $1000 $4,500,000
1975 TD Bank (NYSE: TD) $1000 $400,000
1976 Boeing (NYSE: BA) $1000 $1,300,000
1977 Applied Materials (NASDAQ: AMAT) $1000 $5,000,000
1978 Johnson & Johnson (NYSE: JNJ) $1000 $200,000
1979 Eaton Vance (NYSE: EV) $1000 $200,000
1980 Kellogg (NYSE: K) $1000 $95,600
1981 Home Depot (NYSE: HD) $1000 $8,377,680
1982 Bemis (NYSE: BMS) $1000 $2,000,000
1983 M & T Bank (NYSE: MTB) $1000 $3,100,000
1984 United Healthcare (NYSE: UNH) $1000 $2,153,536
1985 McDonald’s (NYSE: MCD) $1000 $108,000
1986 Microsoft (NASDAQ: MSFT) $1000 $1,316,158
1987 Nike (NYSE: NKE) $1000 $1,529,800
1988 Dell Computer (NYSE: DVMT) $1000 $157,000
1989 Hasbro (NASDAQ: HAS) $1000 $31,481
1990 Cisco (NASDAQ: CSCO) $1000 $440,000
1991 Qualcomm (NASDAQ: QCOM) $1000 $125,300
1992 Starbucks (NASDAQ: SBUX) $1000 $950,000
1993 Infosys (NYSE: INFY) $1000 $1,600,000
1994 Capita (LON: CPI) $1000 $50,000
1995 Monster Beverage (NASDAQ: MNST) $1000 $435,018
1996 Yahoo (NASDAQ: AABA) $1000 $60,000
1997 Amazon (NASDAQ: AMZN) $1000 $550,000
1998 eBay (NASDAQ: EBAY) $1000 $180,000
1999 Keurig Green Mountain (no longer publicly traded) $1000 $500,000
2000 Nvidia (NASDAQ: NVDA) $1000 $103,700
2001 Gilead Sciences (NASDAQ: GILD) $1000 $46,140
2002 Activision Blizzard (NASDAQ: ATVI) $1000 $22,000
2003 Marvel Entertainment (acquired by Disney, no longer publicly traded) $1000 18,926
2004 Booking Holdings Inc (NASDAQ: BKNG; formerly Priceline, NASDAQ: PCLN) $1000 $79,787
2005 Intuitive Surgical (NASDAQ: ISRG) $1000 $31,260
2006 Netflix (NASDAQ: NFLX) $1000 $89,400
2007 Chipotle (NYSE: CMG) $1000 $8,000
2008 Panera Bread (no longer publicly traded) $1000 $9,000
2009 Pharmacyclics (no longer publicly traded) $1000 $172,000
2010 Netflix (NASDAQ: NFLX) $1000 $43,837

You can do this for your child.

Study this series.  Read my guide, The Stock Market is For Everyone.  You can also reach out to me for assistance.

However you do it – please do it.

Financial freedom is the ultimate gift.

 

Birthday Bonanza, Part 7

Good morning, all!  This is the seventh installment in my series about how to set your child up for wealth by investing $1000 at the time s/he is born.

When it comes to investing, the focus is always on the future.  

Sure, there are companies that have been great investments over the past 20 years, but we are only interested in the future.

So look for companies that are poised to do well over the next 20 years of your child’s life.

I would probably avoid companies that have been around since the Industrial Revolution.  These companies may do well, but it is unlikely that they will be the leaders going forward.

Here are some industries and investment themes you may want to consider.

1) Artificial Intelligence (Deep Learning)

2) Robotics and Automation

3) Genomics

4) Mobile Payments

5) Blockchain Technology

6) Energy Storage

7) Gaming

8) Cloud Computing

9) E-Commerce

The guiding principle here: Invest in the future – for your child’s future!

 

Birthday Bonanza, Part 6

Hi, all.

It’s time to talk about how to open an investment account for your child with the $1000 you’ve set aside for this purpose.

What type of account should I open?

I opened a custodial account for my daughter.  I currently control it.  She will take over the account when she is 21.

I think this is a good place to start.

Here is a list of brokerage firms you may consider:

Firm Commission (Per Trade) Minimum Account Balance
TD Ameritrade $6.95 No minimum
Merrill Edge $6.95 No minimum
E-Trade $6.95 $500
Ally $4.95 No minimum
Charles Schwab $4.95 $1000

I, myself have accounts with TD Ameritrade.

I also have a personal account with Robinhood, although they don’t currently offer a custodial account for minors.  I mention it here because Robinhood doesn’t charge a commission, and as such is a wonderful vehicle through which to start a personal investment account for yourself with very little money.  (For more detail, please check out my short investment guide, The Stock Market is For Everyone.)

Watch this space tomorrow.  I’m going to be sharing an episode of one of my favorite podcasts that is geared specifically toward beginning investors of all ages!

 

Birthday Bonanza, Part 5

So far, in my “Birthday Bonanza” series, I’ve discussed:

Now, it’s time to take action.

If you have $1000 ready to open your child’s investment account, great!

Saving a thousand dollars, though, is a very challenging task for some.  This includes married couples and single parents alike.

However, there are a number of ways to come up with the money.

Here are some ideas:

1) Use your income tax refund to fund your child’s investment account.

2) Save $83 per month for 12 months.  The goal of saving for your child’s future should be more than enough motivation to do so!

3) Work a second job, or start a side business, with the purpose of using the first $1000 in profit to fund your child’s investment account.

4) If you are so financially strapped that you can only put $25 a month aside, then put $25 a month aside!  Some money is far better than no money.

I’m sure that many of you have income-generating and/or money-saving ideas to share.  Please don’t be shy!  Tell us about them in the comments section here, or on my Facebook, Twitter or LinkedIn page.

In the next installment, you’re going to open your account!

 

 

Birthday Bonanza, Part 4

Hi, everyone.  I hope you’re all having a good weekend.

In this series over the past week, I’ve been posting about the benefits of investing $1000 in a single stock at the time your child is born, or soon after, and holding onto the investment for the next 18 years.

I’m going to delve into more of the nuts and bolts on getting things set up tomorrow.  This morning, I’d like to discuss a very important piece of preparation for a child’s financial freedom that many parents, conscientious and well-meaning as they may be, do not consider.

And that is this:

Knowledge is an investment, too.

Investing money in your child’s future, of course, is great.  If you do this, your child will have a significant advantage!

However, you also want your child to know how to manage these funds when he or she becomes an adult and assumes control over the account.

Introduce your children to the stock market as they get older and can start to understand.

For example, if you own shares of Starbucks (NASDAQ: SBUX), you might say to them whenever you see or walk into a Starbucks, “We own shares in Starbucks.”

When they reach 10 years old or so, you can actually show them the brokerage account with the shares of Starbucks you own.

You should also talk to them about publicly traded companies they are familiar with.  If it’s possible to buy shares in a company they know, like Disney (NYSE: DIS), Apple (NASDAQ: AAPL), or Activision Blizzard (NASDAQ: ATVI), you may improve the likelihood of them being more engaged in the investing process.

Until next time!

Birthday Bonanza, Part 3

Hi, everyone!  As promised, tonight I’m going to discuss how to go about investing $1000 in the stock market for your child.

This is going to be a lot of information, so you may need to read it a few times.  That’s a good thing!  I read many pieces more than once and find that each time, I tend to learn something more.

So without further ado, here goes!

What should I invest in?

If you are looking to invest $1000 on behalf of your child , my recommendation would be to invest that money in one individual stock.

At this point your child is a newborn, or not much older.  Your goal over the next 18 years is to try and grow this investment as much as possible.

Mutual funds will not give you the potential returns that an individual stock will.

What kind of company should I look for?

There is nothing wrong with buying shares of Coca-Cola (NYSE: KO), Procter & Gamble (NYSE: PG), or Cisco Systems (NASDAQ: CSCO).  These are all members of the Dow Jones Industrial Average, and very stable companies.

When selecting a company to invest in for your child, however, I would look toward the future.

To maximize your return, you need to invest in growth – and I mean hyper growth.

Growth stocks tend to carry more risk.  But they also carry a greater return.

What are some characteristics of a growth company?

Here is a list of characteristics you should look for in a potential investment:

1. A company that is a disruptor.

A disruptor is a company that is changing the way things in a particular industry are being done.

Examples include Amazon (NASDAQ: AMZN), which disrupted retail, and Netflix (NASDAQ: NFLX), which disrupted TV.

2. A company that is a leader in an investment theme that has significant upside.

An example here would be a company like Nvidia (NASDAQ: NVDA), which makes general processing units (GPUs) for gamers.  This is a very fast-growing industry – and they have close to 80% of the GPU market.  Nvidia is also a leader in super-hot themes like self-driving cars and artificial intelligence (AI).  The company’s dominance in these two areas has been a major catalyst for the increase in its share price from $26 to $250 over the past five years.

3. A visionary leader who has the foresight to see new business opportunities before others.

Take Netflix CEO Reed Hastings, who made the decision to start streaming content in 2007.

At the time, streaming video wasn’t on anybody’s radar.

That’s what’s great about investing in companies with innovative leaders.  They have the ability to see, and create, the future that they envision, before anyone else can see it.

4. A company that has a high P/E (price/earnings) ratio and/or is labeled as overvalued in the media.

This goes against what most TV and newsletter pundits will tell you!

However…companies that are disruptive are game-changers.  Game-changers tend to have high valuations.  In other words, they are usually considered expensive by Wall Street.

Don’t let that keep you from buying shares in game-changing companies!

These are the companies whose stock price can go up 10, 20 or 30 times over an 18-year period – resulting, of course, in your $1000 investment going up as well!

What price should I pay?

Try not to quibble about the price.

We all want to own shares at the lowest possible price, but sometimes that is difficult to do.

I’ll give you a couple of real-life examples:

A few years ago, I purchased shares of Nvidia at $68. It had run up from $16 over the previous five years, and was already up four times in value.  To this date, the stock has continued to go up.  It has not come close to $68 again.

If I had waited for the price to go back down, I would either a) still be waiting to this day, or b) would have eventually bought the shares for a higher price.

Another stock I invested in was Splunk (NASDAQ: SPLK).  I purchased shares of Splunk at $68. The price dropped to about $56 over the next two to three months.  Then it proceeded to go to $120 per share!

Buy when you have the money.  Don’t try to “time” your investment.

When should I sell?

In a word…NEVER!

The whole purpose of this series is to encourage parents to purchase stock for their children at the time they are born, or soon after, in order to build wealth by their young adulthood.  For this reason, you should not remotely consider selling your investment for the next 18 years.

The reason why doing this is so powerful is that the stock market, over the last 100 years, has had an upward bias.  The amount of compounding that can take place over 18 years is significant.  (Remember…$1000 invested in Amazon back in 2001 would be worth $116,000 today.)

Once you invest your $1000, do absolutely nothing but be a spectator for the next 18 years.

More to come in the next segment!  For now, read and study this post.  Develop a short list of stocks that fit this profile,  Later this week, we’ll delve into how and where to open an investment account for your child.

 

Birthday Bonanza: Part 2

In this second installment of my “Birthday Bonanza” series, I am going to discuss why it is better to invest $1000 in the stock market for your child when he or she is born, rather than in a savings account or the like.

Why stocks instead of a savings account?

If you’re like the average American, your view of the stock market might be – shall we say – jaded.

Most Americans view the stock market in the same manner as they do Las Vegas.  They think of it as a casino, or a crap shoot.

Maybe you think that it’s only for the wealthy, and not for “average Joes and Janes”  like you.

A savings account, on the other hand, is widely considered a very safe and secure investment.  It’s backed by the FDIC, after all.  So even if the bank becomes insolvent (goes bankrupt), your account is guaranteed up to $100,000.

Here’s the problem with savings accounts, though.  They’re not as safe as you think.

Here’s why.

When you deposit $1000 in a savings account, at the end of the year you will have $1001.

In the meantime, the price of goods and services we use every day will continue to rise. 

$1000 in a savings account over an 18-year period – from the time your child is born to the time he or she turns 18, at current interest rates – won’t even generate a return of 10 percent.

On the other hand, if you invest $1000 in the right stock over an 18-year period, you could make 10, 15, or 20 times your money – or even more!

Is there risk associated with investing in stocks?  Absolutely.

But the potential reward makes the risk worth taking.  Wouldn’t you agree?

Tomorrow night, I’ll talk about how to go about investing $1000 in the stock market for your child to set him or her on the road to a wealthy start in life.

Stay tuned!