Dec

13

As some of you may remember, my son David has wanted to open a trading portfolio for some time. I told him that he could as soon as he saved up $1,000. Well, he accomplished that pretty quickly and opened an account.

He was lucky enough to have a few different readers of this web site give him some advice and guidance and proceeded to make some purchases.

He initially bought WFR and made a tidy little profit. Then he sold out and reinvested in BIIB. He proceeded to make a killing! First BIIB shot up for a tidy profit… then came the buyout rumors and the stock shot through the roof!

As his father, I was a bit concerned. As much as I wanted him to make money, I didn't want him to think that it was that easy. The good news is that he kept his head about him and didn't allow his ego to expand in proportion to his gains (well, most of the time).

It made for very interesting conversation in the dug out of his Little League games and at Boy Scout events. It was fun watching him talk about his gains to his 11, 12, and 13 year old teammates and their inquiring about how they too could make that much money… not normal conversation for that age group (at least not here in the Midwest).

Well, today it happened. As many of you may know, BIIB announced that it was going to go it alone and not be bought out and the stock plummeted 27% (as of this writing, 11:14 am Central time).

He was busy doing school work upstairs when I went to break the news to him. He already knew. He said, "that really stinks, I should have sold out when I had such huge profits. But I'm not worried about it, I still have a small profit and will make it back. But next time I'll take profits, sooner!"

Although he has a lot to learn (heck, don't we all… I know I sure do), I was very proud of his "matter of fact" attitude about the losses.

This loss was a great lesson for him to experience at such a young age and when the money he lost (actually, he really only lost most of his profits) isn't that painful to him. It's not the gains that make us what we are, it's the losses that separate the men from the boys! And today, David took a great step towards manhood by handling this loss with dignity and a positive attitude! I am proud of him!

Ironically, when I went to see him and tell him about the loss, he was doing his daily homeschool reading session…..and he was reading Bill O'Neil's book "How to Make Money in Stocks" (for the second time). I'll get him to read "Practical Speculation" soon and then "Education of a Speculator" sometime after that. In homeschool each week the kids do a section of Paul Heyne's book "The Economic way of Thinking" or Henry Hazlitt's book "Economics in One Lesson".

He just turned 13 and is more interested in sports and his Xbox 360 at this time … and I think he's started to notice girls too …so we'll have to deal with that added distraction next to compete with his studies!

Steve Leslie writes:

I have been a mentor to David and his schoolteacher and I can tell you the lad is enjoying his childhood. His father is a wonderful man and the boy is extremely well-rounded. David is bright, articulate, an outdoorsman, an athlete and a genuinely nice boy who wants to learn about stocks and investing. He has a thirst for knowledge and a desire for growth as a boy into manhood. 

Marlowe Cassetti suggests:

You might encourage your son to look at ETF investing where he can get an appreciation for broader market themes, while reducing company specific risk. I know it is hard not to become enamored with individual stocks, but this example can be a learning experience. I have published an article on Seeking Alpha on this topic that mentions BIIB. 


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3 Comments so far

  1. leonardo Cecchini on December 14, 2007 5:04 am

    You might want your son to enjoy his childhood first, too.

  2. Curmudgeon5632 on December 16, 2007 1:17 am

    'I'll get him to read "Practical Speculation" soon and then "Education of a Speculator" sometime after that.' I would suggest the opposite. EdSpec is a difficult book to [fully] understand because it involves many different subject areas and takes place on many levels. But the basic level, the story of growing up and of the relationship between father and son should be interesting for a thirteen year old. PracSpec is more technical and narrow in scope; I do not think a thirteen year old would find scatter diagrams of P/E versus return particularly intriguing.

  3. jeff on December 18, 2007 12:58 pm

    I remember my first trade which was in Beans during the early 70’s when the cry was “Beans in the Teens.” After that, I thought I was the smartest guy on the planet and that I would soon own the world. I went bust within 6 months. I learned a lifelong lesson from that debacle.

    Jeff

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