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Wall Street Kid
David Leung, who has grown his portfolio to more than half a million dollars since he started investing in the market at age 10, shares financial tips with other young people online.
David Leung was 10 when, as a reward for good grades, his parents began a yearly tradition of giving him 100 shares of stock. Seven years later, his portfolio is worth about $500,000.
A math whiz and aspiring computer scientist, Leung bought into a company he thought showed promise--Microsoft. Since then, he's put almost every dollar he's earned from part-time work into his portfolio, which includes a few other select stocks.
Now he is helping teach other teens and twentysomethings about investment through two Web sites, Investing for Kids (http://library.thinkquest.org/3096), which he founded at age 13, and Invest Smart (http://library.thinkquest.org/10326), a site that teaches money management skills and includes a real-time stock investment game used in more than 9,000 schools nationwide.
"The goal was just to teach other youngsters the concepts of saving and investing and not wasting all their money," says Leung, a senior at Palos Verdes Peninsula High who hopes to attend Stanford or Massachusetts Institute of Technology in the fall.
The primary concept he teaches is simple, if elusive, to more consumer-oriented kids his age: Spend less to have money to invest.
"It doesn't matter how much you save," he says, "as long as you get in the habit."
Leung puts his money where his mouth is. He works part time as a programming consultant to an e-commerce site and invests everything he makes.
All of it.
"I don't really see that many movies. I don't really buy any clothes. I just do stuff like tennis that doesn't cost money," he says.
And he encourages other teenagers to do the same. Instead of spending money at the movies or in the mall, Leung suggests they "give up the night out" and "buy clothes on sale." Instead of gifts, ask for cash, he advises.
"Say your parents got you Nike stock instead of Nike shoes," he says. "Your money would have tripled in the Nike stock, whereas your shoes really aren't worth that much anymore."
Leung believes you're never too young to start planning for the future. It's a refrain he often hears from people who say they wish they had known about his Web site and started investing earlier. And it's a message that is reaching more and more teens.
Invest Smart receives 1 million hits daily. Hosted by Think Quest, an organization that promotes Internet-based learning, the site is so popular that it repeatedly crashed the server, prompting the company to upgrade recently.
Before the advent of the Internet, most kids knew little about the stock market. But the Web is providing a wealth of information about stocks to increasing numbers of kids, through online investment games like David's and other sites.
"[The Internet] is certainly giving kids who are interested a lot more exposure to the market," says Janet Bodnar, senior editor of Kiplinger's Personal Finance magazine and author of "Dollars & Sense for Kids" (Kiplinger Books, 1999). "It's a lot easier to find information on stocks, and because kids tend to go online a lot, there's just a lot more available to them."
While kids cannot own stocks outright until they are 18, through custodial accounts they can invest and trade stocks without the custodian having to approve of each transaction.
Some people in the industry believe that the Internet not only is fostering teens' knowledge of the stock market but also may be encouraging them to invest.
Ginger Thomson, founder and CEO of San Francisco-based DoughNet.com (http://www.doughnet.com), a money management Web site for teens, estimates that at least 2 million teens today are investing, both online and through traditional means. In addition to online banking, the site provides information on donating to charities and a link to StockPoint.com (http://www.stockpoint.com), a site with information on stock values. Thomson says that 15% of her site's visitors link to StockPoint.com and that this percentage is consistent with reports on the number of teens currently investing in the stock market.
"The bar has dropped to who can invest," she says. "You don't have to be wealthy to invest. You can open a relatively small bank account and access it easily."
Teen investors tend to learn a lot about the companies they're considering before committing their money.
"What we've found is that kids who invest are pretty curious to understand the business they're investing in," Thomson says. "They can tell you more than a broker probably could."
For Leung, whose portfolio includes Microsoft, Intel, Computer Associates, Lucent, Coke and Cendant, that is certainly the case. When his parents first gave him the opportunity to invest, "the catch was that I had to do my own research and tell them why I wanted to get the stock," Leung explains. "At the time I was interested in computers."
He used Value Line, an investment guide he found at the library, and chose Microsoft, which has increased in value more than 20 times.
Now Leung tracks his stocks via the Internet, but he rarely trades.
"Every time I sell stock, it goes up a lot," he says. In seven years, he has only traded 20 times.
Patience is a virtue infrequently attributed to kids. Indeed, it is a rare teenager who hears the word CD and thinks certificate of deposit, but that may be changing. Only 12% of teenagers spend all their money immediately after receiving it, according to a 1999 study conducted by Merrill Lynch. The study found that 60% save about half, and 28% save most of their money.
A third of their income comes from parents, the balance from jobs. Whether it's baby-sitting or mowing lawns, more than half of all 14-year-olds participate in some form of paid employment. Almost two-thirds work at least part of the year at age 15, according to the U.S. Bureau of Labor and Statistics.
Teens not only have more money these days but feel more pressure to spend it than previous generations, Bodnar says.
"They're a big target for marketers, which never was the case in the past," she says. "They have access to more money on their own and more money from their parents, plus the economy is doing well. They're definitely more of a consumer force than they were even five years ago."
In 1998, teenagers spent $141 billion, up 60% from 1993, according to Teen Research Unlimited, an Illinois-based research group. In 1998, teens spent an average of $84 of their own money each week, up 16% from 1997.
Bodnar and Thomson believe it is a good idea for teens to invest in the stock market.
The responsibility of teaching kids to avoid such pitfalls belongs to parents. Ninety-four percent of teens depend on their parents as their prime source of financial information, according to a 1999 Youth and Money Survey conducted by the American Saving Education Council.
Children tend to mimic their parents' saving and spending habits, Bodnar says.
"If parents tend to run up a lot of debt, then their kids will tend to do that," she says. "If they see their parents buying every little new gizmo that comes along, they'll want to buy every new gizmo."
Leung, like his peers, takes after his parents. His mother is an accountant, and he describes his dad as "an entrepreneur, manager kind of guy" who runs a hotel and apartment buildings.
"My intent was . . . to give him money for college," says Sam Leung, David's father. "I [gave] it to him in terms of stocks so if he invested early, way before he goes to college, then in my mind, he should have more money than he needs. . . . We are happy the way things turned out."
David says that his parents recently gave his younger sister the same opportunity to invest and that she mimicked his portfolio. He smiles when he says, "She's probably going to overtake me by the time she gets to my age."
* * *
David Leung's Top Tips
* 1. Save as much money as possible.
* 2. Look for growth companies in which your money can increase at least 15% annually.
* 3. Do not overpay for stocks.
* 4. Buy when the stock price is low.
* 5. Don't panic and sell stocks at a loss unless there is some change in the company's fundamentals, "because if the company was good when you bought it and the fundamentals are still good, chances are it'll go back up."
* * *
Starting Off Kids in the Dot-Com World
Ginger Thomson, CEO of DoughNet.com (http://www.doughnet.com), and Janet Bodnar, author of "Dollars & Sense for Kids" (Kiplinger Books, 1999), offer the following tips and advice for wannabe whiz kid investors:
Starting age: 12 or 13. "Kids that age can understand the concept of what's going on. They don't have to be real sophisticated and know about price earnings ratios, but they know what it means to own a piece of a company . . . that when people spend money at that store, you, as a shareholder, benefit," Bodnar says.
Minimum to start: $300 to $500. "Often when kids start to invest, they don't have a heck of a lot of money," Bodnar says. "They should put the money in the bank first, and when they have $300 to $500, take it out of the bank and shift it into the stock market."
Where to invest: Invest in what you know. "The companies should be relevant to the child--something they know about or are curious about," Thomson says. "They can go to those companies' Web sites to find out what their products are."
Bodnar says a list of companies that sell stocks directly from their Web sites can be found at
Where to learn the basics: Investing for Kids (http://library.thinkquest.org/3096),
Invest Smart (http://library.thinkquest.org/10326),
Better Investing (http://www.better-investing.org/youth/student.html),
The Stock Market Game (http://www.smg2000.org), DoughNet.com(http://www.doughnet.com),
"Dollars and Sense for Kids" (Kiplinger Books, 1999).
Inexpensive and/or kid-oriented brokers: "Schwab.com (http://www.schwab.com) has really great performing, no-load mutual funds that have a lower entry bar [than other stocks]," Thomson says. She also recommends DLJ Direct (http://www.dljdirect.com),
Stein Roe (http://www.steinroe.com) and
Share Builder (http://www.sharebuilder.com), which allows parents and kids to build a portfolio over time with a small monthly increment).
"Online brokers have among the cheapest commissions out there. They'll charge you maybe $7 or $8 a trade," Bodnar adds. For mutual funds, she recommends the Stein Roe Young Investor Fund and USAA First Start Growth Fund.
* * * Susan Carpenter can be reached at firstname.lastname@example.org.
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