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Two roads diverged in a wood,
and I took the one less traveled by
And that has made all the difference
–Robert Frost
The Road Not Taken, 1915
I have volunteered to teach a module on stock fund investing for students taking a new elective course at a small private high school in Sacramento. Here is a fleshed out outline of what I’m thinking about presenting. I want to educate “my kids” about the factors that ushered in the advent of the index fund and ETF and how to distinguish between the virtues and vices of their investment options. In the process, I’ll shine a light on those TV commercials showing an advisor in a tweed jacket speaking patronizingly about what to do now in a voice dripping with sincerity.
Above all, I want these 18-year-olds to feel confident and not be intimidated by advisors, brokers or their apologists. In short, I hope to add a few names to the small cadre of informed young consumers of the stock market. To be sure, nothing has been finalized after an enthusiastic handshake with the head of the high school in the spring, so all this may be the ramblings of an old fool on a belated mission. By the way, if anyone can use this article as a refresher or has a kid about to take the dive, that would be a joy.
The Road Is Long, with Many a Winding Turn
Learning how to invest in the stock market is a lot like learning how to drive. Done wisely, it will get you to where you want to go—a life of financial well-being and money for college, your first home, raising your children, and then their college. Done recklessly, investing in stocks is fraught with danger. Over the last twenty years, the overall stock market has gained an average of almost 10% a year. Pretty cool, right? But a sputtering economy and extremes of human emotion can cause this gradually rising slope to be temporarily disrupted by violent downside episodes of more than 40% a year.
After bear markets, though, the inexorable march upward resumes. How can I be so arrogant and so sure? Because it always has. Stocks have tended to finish higher over 80% of the time across ten years and over 90% across twenty. They have overcome the Crash of 1929, the dot.com technology massacre at the turn of the century and the mortgage lending fiasco of 2008.
Rolling the Dice with Individual Stocks
Buying individual stocks is risky, too risky for most of us. If management executes poorly and earnings disappoint or if the public loses confidence in its product, you will feel the pain. Boeing’s stock lost 23% in a few days following its two tragic air accidents in 2019. What could that mean for you? Well, the $1,000 your parents set aside for college textbooks is now $770.
Single-stock risk is particularly perilous. Even Apple has sustained staggering blows on the way to investor nirvana, plummeting over 50% in 2008. Sure, rooting on your individual picks is challenging and fun, but serious investing needs to be more than that—certainly so when replenishing your tuition savings account or beginning to save for a down payment. Many have said that diversification js the only free lunch on Wall Street.
What’s a Mutual Fund, Anyway?
Let’s say your mom would love to have a second home in Tahoe, but she only has half the money needed for the down payment. She enlists two women friends to invest 25% each into a chalet. Your mom owns 50% and each of her friends owns one-fourth. The three partners will divvy up any gain or loss in the value of their mountain retreat according to their proportionate share. A mutual fund works much the same way. People pool their money to buy stocks, with each person owning the percentage of shares represented by the size of her investment.
Cost: The Achilles Heal of Professionally-Managed Funds
The modern era of mutual fund investing that began in the 1920s solved the problem of diversification by providing instant ownership of a large number of stocks. Until the 1980s, virtually all mutual funds were actively-managed by a professional stock picker. His mission was to replace stocks deemed overvalued with those believed to be undervalued to maximize the fund holder’s profits.
This oversight freed investors from having to monitor developments in their individual stocks, opening up time for leisure pursuits or, of course, (ugh!) homework. The aura of professional supervision is particularly attractive to individuals—including many students—without the time, ability or desire to manage their own finances.
But hold it. These features of the active mutual fund must be weighed against a stark disadvantage. The prodigious costs of maintaining a mammoth research division to turn up ideas for the portfolio managers have proven a stubbornly high hurdle for them to clear
Index Funds: The Portfolio Manager Has No Clothes
Until the mid-1970s, the commonplace assumption was that portfolio managers’ trading skill enhances the performance of their funds. It was a slam dunk. After all, many of them had Ivy League pedigree and most were educated in elite business schools. It was around that time that several market observers began to question the seemingly unassailable conviction that the quality of professional management determines the success of a mutual fund.
These renegades constructed an index fund consisting of all the stocks in the S&P 500. No portfolio management or trading was done, so that the fund’s holdings were fixed. As you might imagine, these skeptics were ridiculed as naïve and traitorous by brokers and advisors whose livelihoods were on the line.
But the early results with the index (or passive) fund were encouraging and stimulated considerable academic research. Over the last twenty-five years, literally hundreds of studies have confirmed that gains from actively-managed mutual funds generally do not exceed those for similar index funds. In fact, the results for index funds often eclipse those with portfolio managers. In 2024, active funds surpassed the S&P Index fund less than 25% of the time.
Just how cheap are index funds, anyway? They usually cost about one-third as much as active funds and fees for many of the largest passive funds are so low as to be incidental. Let’s bring that notion closer to home. Say your parents have socked away $50,000 toward your first two years of college tuition and associated expenses and put half into a savings account. They allocate the remaining $25,000 to Vanguard’s S&P 500 Index fund. What is their total annual cost? $1,000? Nope. $500? Uh-uh. Try $10 (not a typo), folks, and that includes all operational and administrative expenses in addition to the management fee itself.
Passive funds are no longer the poor kid on the block. In response to investor demand, thousands of index funds have been launched, ranging from highly diversified broad market indexes like the S&P 500 to specialized offerings in areas like aerospace and real estate. With a boost from the financial media and grudging acceptance by the formerly disdainful professional establishment, a cadre of informed mutual fund consumers has been born. I want you to be one of them.
The ETF Is Not The New Model Jaguar
By the turn of the century, the actively-managed mutual fund was fast becoming a dinosaur. Its egregious management fees were exposed by the more efficient index fund and savvy consumers were transferring their assets from one to the other. Asset management companies, which had gorged on their expensive actively-managed funds for seventy-five years, were hemorrhaging money and shedding investors. At the same time, developers of the index fund were emboldened by its stunning success. These two unlikely bedfellows were scrambling for a new consumer-friendly product. They found it in the exchange-traded fund (ETF),
The ETF structure has several advantages over active management and even the index fund, which is actually a subclass of the mutual fund. Though much cheaper, index funds carry other baggage of their active counterparts. Passive funds cannot be bought or sold during the market day, but only at the closing price. They are also subject to the annoying restrictions often placed on mutual and index fund investors, though limitations on the number of times you can return to a fund you recently exited would typically not apply to long-term holders of index funds.
By contrast, the ETF wrapper goes way beyond the features of actively-managed mutual funds. Since the ETF is just a new way to package passive funds, they are likewise cheap. No buying or selling occurs in either index funds or ETFs, which also share favorable tax treatment not accorded their active brethren. ETFs are also more flexible than mutual funds and passive funds, allowing trading whenever the market is open, just like a stock.
Does all this good come with any bad? Well, the flexibility of the ETF has come under scrutiny for its susceptibility to the kind of frenzied trading that gives rise to the speculative juices. Ironically, rampant short-term trading may well be deterred by the rigidity of mutual funds’ transaction rules. And to be sure, ETF trades take place in an auction-like market with a spread between the bid and ask prices, whereas mutual and index funds are bought and sold at the closing net asset value. The friction of the ETF is a cost that makes them less amenable to accumulating or withdrawing shares repeatedly in a college savings or retirement plan.
Despite these reservations, the ETF is one of the most successful financial products ever created. Although not yet a topic of conversation at the local club, the ETF has become the darling of the investment community. By the end of 2024, assets in ETFs represented fully one-third of those in all stock funds.
As of mid-2025, there were about four-thousand ETFs in the U.S. and ten thousand internationally. Similar but in many ways superior to index funds, they facilitate investment in widely followed market benchmarks like the Dow and S&P, as well as tap into thematic trends like biotechnology and real estate. ETFs exist for expressing values through investing, like religious beliefs and sustainable farming. Learning how to invest through funds reflecting personal interests is a great way for you to get started. Remember, diversification and time are on your side, so save, invest and be patient.
Active Management Descends on the ETF
You’d better look now because they’re coming. The established asset gatherers were hit by a double-whammy. First, their lucrative actively-managed mutual fund model was overrun by the proliferation of index funds of all stripes. And then the entire mutual fund design—including the subclass of index funds—was supplanted by the entirely new ETF structure. But don’t sell the enterprising fund providers short. As investors fled their costly and outmoded mutual funds for streamlined ETFs, the big boys needed a new gig. Ever inventive, they fashioned a new version of the ETF with, of course, active management.
All those portfolio managers who failed to outrun passive funds were retooled to pilot ETFs artfully priced between the cost of the mutual fund and index ETF. The marketing allure of a relatively cheap ETF combined with button-down surveillance has been breathtaking. In the last two years, new active ETF offerings have far surpassed those for index ETFs. The revamped ETF has also been stealing market share from its predecessor.
The Showdown
Whether the relocated portfolio managers will be able to tease out better results than they did steering their mutual funds seems a stretch. Unfortunately, since very few active ETFs have been around for more than a few years, little academic study comparing their performance against passive ETFs has been done to deliver a verdict. Until more research is available, we won’t know if the active ETF is indeed the Holy Grail or just another fool’s paradise.
Many great ideas below! Still haven’t read them all, but one more “biggie,” methinks, for young people would be to instruct on the uses and abuses of debt, something that every single young person who isn’t born to the manor will be all-too familiar.
Of course, student debt and car payments can loom large, but I think maybe the biggest way almost all young people get into trouble is with credit cards.
So easy to live a life of constant anxiety and stress, or worse, through that little piece of plastic, especially now that the account numbers are embedded in phones, and maybe soon, everybody’s foreheads…
Completely separately, I’d be interested to know approximately what percentage of parents are sufficiently wise to really teach their children well about money in general. And how many schools make any real effort at all?
Last, thank you Catherine for the link to the great article about my one of my heroes! The rest of your comment is very insightful, too.
Oh yes, credit cards. Paying off those 20% fees (and 30% for department stores) is almost undoubtedly the wisest short-term “investment.”
Congrats for getting engaged in growing the minds of our young adults.
You call it a “module” so is this one element in a larger financial literacy course, or is it the bulk of their study of investing? How many hours total over how many days or weeks?
In any case, you want to meet the students where they are beginning and carry their knowledge forward as far as is feasible with the mind space and time available.
I’d start with the “why” of investing. And at least a minute or two in the other kinds of investment (your experience with rental real estate immediately comes to mind, and since this is a favorite strategy for the FIRE crowd, probably already something your students are aware of.)
When it comes to stock picking, best not merely to have students pick something. What will they compare their picks to? (I don’t know who the latest celebrity finance gurus are, but there are regularly stocks picked out on podcasts by bonafide financial experts. I love to go back a few months and listen and then bring up the stock listings today and see how they turned out so far.). How about the classic throw-a-dart and that’s the portfolio to beat? (An exercise common in my high school era.)
My husband used to joke, “I’d rather be lucky than good.” What mechanisms or exercises can you think of to allow students to test for a misperception that an analyst is smarter than others, rather than they just were lucky?
What’s their baseline knowledge of the most fundamental concepts? I love this St. Louis Fed piece on Benjamin Franklin and the argument for fiat currency. https://fraser.stlouisfed.org/title/learning-resource-benjamin-franklin-birth-a-paper-money-economy-5959/booklet-benjamin-franklin-birth-a-paper-money-economy-579702
Might be relevant even in a stock picking class, since there are gold funds to be bought these days.
How can I get you to be a guest lecturer in my own guest lectures! Yes, I need to spend more time on the “why.” So important—how can they know what to do without first knowing their goals?
Steve, upon reading your post, I wondered if the students taking your stock fund investing module would first need to satisfy any prerequisites.
In particular, I would hope they would have a good basic understanding of both inflation and compound growth before considering stock fund investing.
I suspect few young people have ever considered how inflation affects a currency’s “purchasing power.” The table on page 38 of the latest edition of Burton Malkiel’s A Random Walk Down Wall Street is a good illustration of the decline of purchasing power of the dollar over the period from 1962 to 2021. If you are to increase your wealth, this table illustrates how, over the long term, you must earn investment returns that exceed the inflation rate, otherwise your purchasing power along with your wealth will either languish or decline.
Over time, what can you invest in that will give you the best chance to earn inflation-beating returns? Well, stocks of course. Hence, a natural lead-in to stock fund investing.
While inflation is an obstacle to growing wealthier, compound growth is a wind at our backs. A graph of the exponential growth of an investment should impress upon the students that investing is slow cooking and is an activity that spans decades. It should also stress the importance of investing continuously over the course of one’s working life and not doing anything to disrupt compounding. Hopefully, this would also help the students understand the difference between investment (requiring patience) and speculation (desire for quick profits).
Thinking back to the time when I was 18, I can’t recall knowing anything about inflation or compounding (other than, perhaps, compound interest in a savings account.) If I had taken a stock fund investing course at that time, I suspect that I would have thought of stock investing as a way to “get rich” rather than a way to build financial security.
Wow, you’re right—I neglected to give them a thorough understanding of inflation. I do discuss the difference between real and nominal rates, but what good is that without an understanding of what inflation actually is and how it comes about?
I did give them an example of the power of compounding ($100 initial and 48 $60 monthly payments until they reach 65–a million!)
Steve, first of all you are to be commended for wanting to bring financial literacy to young people. As someone who worked 40 years in the financial world it is the first thing I wanted to do when I retired and have now been doing it for 15 years to high schools, colleges, social service organizations and even prisons’. The first thing I focus on is budgeting, how you have to live within your means and that savings, both for emergencies and retirement, is a bill you owe yourself every month. I also agree with Mr. Wheeler below about teaching them about interest rates, compounding and how money grows. They need to understand that their biggest asset right now is time. I would also focus on retirement plans especially Roth IRA/401k. These are no brainers for long term, tax free growth. Lastly I highly recommend a compound interest calculator at EconLink. It graphically shows how money grows and the kids can plug in numbers and play with different scenarios. Also, go to You Tube and search for “Credit Cards Explained with a Glass of Water”. This usually blows their minds. Best of luck to you in this worthwhile endeavor.
Let me respond to some of your excellent points. How about the difference between the nominal interest rate and the real (inflation-adjusted) rate. That difference is commonly addressed with regard to stock returns but have you ever seen the same for returns on real estate? I also wanted to give them a feel for the power of compounding by having them see what an initial $100 and $60 monthly contributions over the 48 years until they’re 65 will get them—a million!
Steve,
First, good on you for your desire to help young people learn about investing and personal finance, vital life-skill subjects that appear to me to be sorely neglected in most schools and homes.
Second, I confess to not reading every word you wrote carefully, nor have I read all the existing comments.
Nevertheless, my impressions are that you’re starting a few steps too far down the road. For example, I think the meaning of an average stock market gain of 10% will be utterly lost on about 98% of kids.
I’d say the first thing they need to learn is the value of their greatest asset, which is time. From there, and relatedly, they need to learn what compounding means, what it does, its “snowball” effects, and what happens when you fail to invest, or “cash out” early for any reason.
(If it were me, I could offer a personal example. A friend started in the same profession at the same company as I did, but was hired one year earlier. He had learned from his parents to max out the (unmatched) 401K every year and just put the money in the S&P 500 option. He never wavered. One year later, I started at the company, though I didn’t max out for a few years. More importantly, I “cashed out” twice along the way, fearing stock collapses that never happened. Today, my friend has well over double my net worth and buys custom airplanes like I might buy a Subaru.)
Speaking of “net worth,” your last session with the kids might be an examination of that term, and how an excess focus on it can create a boat load of unhappiness and a pathetic life.
Last, before learning about stuff like ETFs, kids need more basics like the different types of investment risk. I don’t have my investing library handy right now, but I think Paul Merriman’s book, “Financial Fitness Forever” had a pretty good discussion of that. Merriman, by the way, knows a whole lot about educating young people with regard to investing.
Best of luck to you in your endeavor!
Remember, this was only an outline! So right about compounding and risk. They will get an introduction to compounding via a demonstration of starting with just $100, then contributing $60 monthly for the 48 years until they’re 65. They will also complete the Risk Tolerance Scale and discuss how their results relate to how to invest and even whether they should be in the market at all.
I think Robert’s comments are 100% correct: you are starting too far down the road. Several years ago, HD contributor John Lim produced a booklet titled:
Raising Your Child’s Financial IQ: The Most Important Things
You can access by plugging this into your browser:
https://humbledollar.com/wp-content/uploads/2019/12/HOW-TO-RAISE-YOUR-CHILD%E2%80%99S-FINANCIAL-IQ.pdf
I’m not saying it is perfect, but it would be a good starting place for you to think about your syllabus.
Thanks for giving everyone that tip. I’ve been AWOL for a while, trying to integrate the many helpful comments into the next draft.
Steve, although I’ve probably read about 300 books on investing, I wish I had someone like you when I was a teenager willing to talk about these topics. I still have many of the books and read my favorites again now and then.
Since most schools fail in teaching what we need to know once we get into the working world and saving for retirement, I think it’s good to have somewhat of a financial foundation to build a secure future, especially the age group you’ll be addressing. Perhaps a three fund portfolio is all they’ll need, but at least having the basic understanding of your course will provide them better knowledge to know what to own and why.
You mention fund expense fees. This tool from author and retired banker Larry Bates should be helpful to see how expenses can make a difference. The downside to this tool is that it only looks at a one time investment; not ongoing additions. https://larrybates.ca/t-rex-score/
I hope you have great success with the class and get good reviews! Please provide class feedback when available.
Thanks for your support. HD will be the first to hear IF my offer to the school will come to pass.
That’s a great tool, Olin. Thanks for posting it.
So if this is a module, is it safe to assume that they’ve already covered what a share of stock it, what a mutual fund is, etc?
You don’t want to bore them by redoing things they’ve already done.
Instead of telling them things why not create problems for them to do, esp ones where they can see the effect of compounding, even on small amounts.
The less you have to say, the more they have to do, the higher the chances that they’ll actually remember anything you’re trying to get across.
I don’t think a class in this format will do well with high schoolers unfortunately. I especially don’t agree with the “follow a stock” approach in a competitive classroom setting. That’s a pretty common teaching trope regarding stock investing, and it’s just going to devolve into gambling degeneracy amongst the students. The students would probably be a lot better off if you synthesized the info and videos from investopedia regarding the absolute basics of financial literacy forgoing lessons about capital markets.
If I absolutely had to follow this lesson plan, I would structure it around completing all the modules on the moneychimp website. That’s an amazing website for teaching investing fundamentals.
It’s play money and I will ensure won’t escalate to competitiveness. Everyone will not be reporting their performance. Rampant short-term trading for kids who like “action” will be emphasized. I will definitely consult those videos. Thank you for bringing them to my attention.
Just how will you prevent a bunch of kids from comparing their results? I trust you mean that the dangers of any short term trading will be emphasized.
In addition to the resources J Mo suggested, there are plenty on this site and on Bogleheads. No reason to reinvent the wheel.
The results will not be known to anyone but the student. And, as written clearly in the article, the dangers of short-term trading will be emphasized.
If you really think the kids won’t compare notes I have a nice bridge to sell you. Besides, that kind of experiment is meaningless with only one data point, not to mention the possibility the stock will out perform.
Bravo for making yourself available to teach these important skills.
I would suggest a prerequisite class covering the challenges young people face when launched from the warmth and safety of mom and dads house. This is a period when a budget and a spreadsheet can help put young adults into the correct orbit. The first item in the budget? Pay yourself first. Other obvious curriculum include credit and debit card usage, checking accounts, living within their means. How about pensions? You’d be amazed at the number of workers who leave matching funds on the table because they don’t know how a 401K works.
Such instruction would enable kids to get a running start. I was beyond age 30 by the time I got it together. How would my portfolio look differently if I had started 10 years earlier?
Dan, budgeting, using credit cards (and hope-fully learning never to pay interest of 20% for late or no monthly payment and other building blocks will be tackled by presenters before me, since the stock market is considered the most complex topic (along with buying your first home, which l also would be teaching in a subsequent module). I thought I emphasized the virtues of long-term investment but apparently not enough. And I thought at this age kids are more focused on college costs, buying a first home and paying for their own kid’s college tuition than retirement. But your post suggests I might be underestimating their future time perspective.
The stock market is only a complex topic if you insist on buying individual stocks and/or sector funds. A simple three fund portfolio is all these kids need at this stage and adding complexity will only help them screw up.
Sorry, but I vigorously don’t agree: Investing in the market IS complex and my purpose is to inform them about all investment alternatives including ETFs so perhaps they will want to intelligently choose the simple beauty of the 3-fund portfolio. But I certainly don’t want them to be single-minded and dismissive of the virtues of other choices. How else can they be informed enough to recognize the virtue of the elegant simplicity of Bogel’s creation?
Agreed, Steve. Arming them with the maximum available information about their choices is the best way to help them make clear-eyed decisions. Giving them only part of the picture would be neither fair nor wise. I applaud your syllabus, although personally I’d be tempted to spend less time on the history of mutual funds than you have allotted.
What virtues? These are 16 and 17 year olds, right? No more reason to teach them how to buy individual stocks than how to gamble on roulette. You should be able to explain the workings of the stock market and the value of diversification without encouraging stock picking.
Are you of the opinion that these young people won’t learn about stock picking on their own? Doesn’t it seem wise that they would be provided the basics by an expert like Steve rather than finding out about stock trading from friends or blogs or whatever?
I think it’s highly unlikely the idea of investing in stocks would cross their minds. Did you read Quinn’s piece on how few adults are financially literate, never mind kids? If you can get them to a) start saving, b) set up an emergency fund and c) invest in a total market index fund/ETF you are way ahead of the game.
In my kids’ high school senior year, they would get text messages from other students on things like crypto schemes that they should buy into. So I don’t think it’s too soon to prepare them for the crazy world of scams and phishing they are entering. One of my kids just got small job (while still searching for a “career” position) and asked me whether she should opt out of a CalSaver account (the state’s small business personal IRA plan). There are things they need to know for sure…
BTW, apologize for the late comment. I just needed to go AWOL for a while. Interesting you mentioned crypto. I have learned from the grapevine that the students are enamored with it. I don’t want to feed their frenzy but also don’t want to sound so negative that I inadvertently evoke their trademark teenager rebellion! Thanks for the comment.
“ETFs exist for expressing values through investing, like religious beliefs and sustainable farming. Learning how to invest through funds reflecting personal interests is a great way for you to get started. Remember, diversification and time are on your side, so save, invest and be patient.”
If you restrict your investments based on “personal interests” you are by definition not fully diversified.
“Whether the relocated portfolio managers will be able to tease out better results than they did steering their mutual funds seems a stretch.”
It’s not a stretch. If their fees are higher, which they will be, it’s a given.
All your students need are two or three Vanguard index mutual funds or the equivalent ETFs. You are doing them a disservice to suggest otherwise. Total US plus Total International plus Total Bond. Or Total Global plus Total Bond. In the early years they don’t really need a bond fund.
It occurs to me that this essay makes no mention of bonds, fixed income or emergency funds. Are there other classes they will attend on financial literacy in general, because stock investing is only one part of that? And if you use the prudent Bogleheads three-fund portfolio it’s pretty straightforward and doesn’t need a semester-long class.
Here we go again! I would argue (from the perhaps biased perspective of a psychologist) that all investment choices are affected by personal interests and needs. Over and beyond the intelligence of index fund investing, investors are affected by their preference for simplicity, certainty and safety (except, of course, situations like barreling into the dangerous sequence of returns).
It was not my assigned purview to teach about bonds. I will touch on why they are so important in the late accumulation and withdrawal phase and short-term bond funds in particular as part of an emergency fund. I will not emphasize bonds because at this juncture on their investment journey students will be more concerned about college expenses and the comparative financial consequences of renting vs. buying their first home than retirement , although I may be underestimating their financial future time perspective Time to travel, I am sorry that my posts seem to evoke so much personal upset for you.
Don’t assume all students will understand percentages. I’ve known otherwise educated adults who lack this understanding. To make the lesson memorable, provide students with ways to engage, interact, and recap.
You’re so right. Fortunately, that’s just what I’m doing. They’ll be picking a stock (and an ETF) of their choice from one of the 11 sectors of the S&P and following them on the Apple stock quote App. They’ll also be filling out the Risk Tolerance Scale. These should generate lots of interest and discussion. I realize the reading level required is quite high and potentially college freshman level, but the students will be seniors attending an elective at the most highly regarded high school in the city.
What is the point of picking one stock and a sector ETF? Talk about undiversified. Should be easy enough to illustrate the dangers of owning a single stock without getting into sector ETFs, which should be avoided.
The point of buying one stock in the context of demonstrating how volatile and unpredictable they are in the context of the S&P (both shown on the Apple Stock App) is certainly no vice.
But you also probably need to find a psychological way of addressing those kids who beat the index with their stock picks – that’s when behaviours like thinking “it’s obvious” what better stocks or sectors are start to manifest.
Your real challenge is persuading teens that boring and slow is better than quick money.
Thank you for your instilling the next generation with knowledge that will positively change their family tree forever.
My son is a History teacher at the high school level and teaches Financial Literacy also. I am pretty sure that financial literacy will have more of an impact on his students lives than history will
“Those who ignore/forget/cannot remember the past/history are doomed to repeat it.”
Seems pretty relevant right now with the rise of dictatorships, disguised or open. Ditto expansionism.
I hope and trust he’s getting the same amount of gratification from teaching personal finance to high school kids than I am feeling just about the prospect of doing it, certainly more so than lecturing as a professor to an audience of over 100 barely recognizable college students. I have read that personal finance courses often generate very high interest on campus. I am hoping for a class of maybe 10 or 15 kids. Thanks for the comment.
If you don’t have an appreciation of history how do you know why the powerful are lying to you this time…..
Right on! I wish I would have had such a course.
If that’s a talk track my advice would be to slow the heck down and really do absolute 101 things. It might feel patronising but you probably need to take kids with you which means getting them on board with some really basic things.
Like what is investment. Difference between investment and gambling. What are stocks and bonds? What are are fundamentals re deciding what you are putting at risk and for what purpose/timeframe? Why does it matter? Concept of alpha and why you probably don’t have it. What buying the most diversified index might mean? do you stick to US or take a more global view?
And yes you probably need to address Crypto and meme stocks.
Don’t bias it with your own beliefs and prejudices re stockpicking. Don’t overly emphasise (recent) past data which points to S&P/Nasdaq smashing everything else.
Don’t lose them on things like ETFs and your preferences. ETF is a dangerous banner name that nowadays means little more than “stock” as a terms of breadth.
You’re right about many points (but not all!).
Let me take them in turn.
You’re right about cooling it. Others have told me the same.I will also cover gambling and addiction, in clouding
The post had a whole section on stocks! I will also cover noth gambling and addiction—as well as the position of the highly successful stock owner of Dallas Mavericks (Mark Cuban) that “buying individual stocks is akin to gamblingi.”
Surpised you mention alpha. I thought it might be too sophisticated for them, but maybe not.
I mention the efficiency of broad market index funds, but seemingly not the emphasis it deserves.
I have been told that the kids are fascinated by crypto and I didn’t want to feed the frenzy. Probably I should cover at least its volatility and
the controversy regarding its future status as a means of transacting. There are now a few ETFs, at least one of which ETFs attempts to dampen the volatility. Crypto is only barely correlated with stocks, and I could only see it as a 3-5% holding for diversification.
Thanks for the post. It will help me amend the talk.
Steve, I wish you great success with your new course. My daughter was home-schooled, but her in-home curriculum was supplemented by that of a network of “communities” put together by an umbrella organization. Financial education was included.
During one semester, the kids practiced investing–with imaginary money– through an online program that allowed purchasing and tracking a portfolio of stocks, with a competitive aspect to see who chose best when they were sold at the end of the term. They were limited to 10 or 20 stocks, as I recall. My daughter scored high by mimicking an index by spreading her purchases through all sectors.Fun learning!
Edmund
What a wonderful experience for you (and your kids!). The money is of course “play money,” but I like your idea of diversifying right from the get-go. My plan is to have them pick a stock from their favorite S&P sector. Then they will compare the excessive volatility of an individual stock to a “diversified” index (like the S&P or Nasdaq) on the Apple stock app.
I do wonder at the value of those stock picking simulations. The issue is timeframe. If the horizon is a semester or so then most advice would be don’t invest in stocks at all, that is little more than day trading.
As it is I see 2 responses – kids who lose out or swing and miss perhaps take home a valuable lesson that they don’t have some innate skill, but those who win might end up overestimating their abilities to beat the market.