5 simple ways to teach kids about investing

One of the biggest mistakes parents make today when trying to instill financial literacy into their children is trying to run before their kids can crawl.

Teaching your kids to invest in individual stocks before they have a basic foundation of some core financial principles is like trying to teach a youth basketball player to dunk before you teach them how to dribble the ball.

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Learning about individual stocks is the sizzle but not a core foundational piece that the beginning investor should spend a lot of time on. I’d implore you to keep it simple out of the gates until such time they can start managing their portfolio from an individual stock perspective.

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Understanding the time horizon might be the most significant factor in determining how you will ultimately structure your portfolio.

Know Your Time Horizon

It’s is typically an excellent time to get a top-down understanding of the many investment products that one will use, in a diversified fashion, to meet their future savings goals.

Understand Risk versus Reward

It has been said that the single biggest determinant of investor returns comes from asset allocation, otherwise known as diversification.

Establish Your Diversification

These days, a never-ending list of choices exists in the financial marketplace. And picking stocks, bonds, mutual funds, ETFs or money managers to execute each part of your well-diversified portfolio is not easy to do.

Choose Your Investments

There is a balance between looking at your portfolio too much versus not enough. Just because you set an asset allocation doesn’t mean you never tweak it. It’s important to monitor things from time to time and rebalance every so often.

Maintain Your Course