Forefront’s Monday Market Update – September 21st

A 17-Year-Old Asked Me About Trading Options

The title isn’t a hypothetical folks, it happened last week! My kids are typical, they ride their bikes up and down my street, trying to actively take years off of mine and Christina’s lives with their lack of discretion towards danger. Alas, we call in reinforcements from time to time in the form of a babysitter to watch them while they play outside.

Last week, our sitter whose parents are clients of mine, asked me about trading options. She told me her brother had opened a Robinhood account and told her how he made $500 on a small options trade.

*To a 17-year-old, making $500 dollars “without doing anything” is like hitting the lotto!

Kids Are Breaking Open Their Piggy Banks to Trade Stocks

My head almost exploded when she was telling me that she wanted to open a Robinhood account, and could I help her. I thought about it for a day, spoke to her parents, and then helped her open an account.

I know she might lose money, in fact if she trades options its almost an inevitability. At 17 thinking about investing my money for the future was the last thing on my mind, so I had to help her. Don’t worry I told her that 90% of the money she saves has to go into building a diversified portfolio for the future. The other 10% she was free to take whatever risk she wanted and I would be happy to provide guidance.

Who Is Jerome Powell?

This interaction began last week, and started with the initial question of “who is Jerome Powell?” Our sitter had taken to watching CNBC during the day, and although traditional financial media does more harm than good, the fact that a 17-year-old had an interest was amazing to me.

It’s easy to turn on the television and become bothered and angry about what we see, but I have not stopped thinking about this interaction since last week. Subsequently, she and her brother have sent me ideas they have, all with a thesis behind it for why they think it will work. I have to admit, the level of intelligence they display is astounding, especially since I have had interns without that level of economic knowledge.

Hope Is Alive

That might be a bit dramatic, but I do feel a lot more hope about future generations caring about finance, and more importantly their own finances.

Robinhood, the popular trading site, reports more than 3 million new trading account since the beginning of 2020.

  • Young people learning about the stock market, even if their first experience is a loss of capital is a good thing.
  • We all think we can outsmart the market at one point, we learn quickly, and shift our strategy to long term investing, in good, high-quality companies.
  • Our sitter has switched from Starbucks to Dunkin Donuts, because her parents own the stock.
  • It’s fun investing in the products and services you use, it lets you feel connected to your investments.

Where’s the data?

These Monday Market Updates have been very data heavy lately, and although I had a really good topic for today, talking about a younger generation really getting into personal finance and saving really has me pumped up. Next week we will be back to our regular data heavy updates, but let’s take a moment to applaud a younger generation for wanting to try!

Would I prefer if they wanted to try through a buy and hold strategy of good, high quality companies? Of course, but where is the fun in that? These kids need to take chances, take risk, lose some money, and then will circle back to a strategy of long-term growth.

So What?

So how does this impact all of you?

The future is bright, every news story you see about a teenager making a bad decision, just remember there are many who are at home listening to the Berkshire Hathaway earnings call.
Building a plan starts with education, encourage the young people you know to continue their interest in the stock market and investing.

What to look forward to this week

Thursday Sept 17th, 2020

Initial and Continuing Jobless Claims @ 8:30AM

Most anticipated earnings for this week

earnings sept 21

Latest Covid-19 Data

covid data sept 21