E-trade Account for 14 year old?

[Chocaholic]

Our youngest son wants to try his hand at investing. He has a few hundred $ saved and we'd like to set him up with an on-line account. A few questions:

Best to do it completely in his name and SS#? What about taxes, etc?
Is e-trade the way to go, or any other suggestions?

I'm a mutual fund guy myself (no time or patience for individual stocks), but I think he'll have fun researching and watching his stock picks rise and fall.

Thanks!

[Schumi]

No idea on the setup but...

I think this is a brilliant idea.


14 seems like a really good age to have a go at it and learn a lot in the process.

[Shuie]

If my kid asked me something like that I would be so proud that I would match whatever he/she had saved and put it all in a 529 plan that could be used towards college. 80% of the contribution would go into an index fund and he/she could trade the rest until they figured out that picking stocks and trying to time the market is a suckers game.

[id10t]

Has he tried playing imaginary yet?

Try something like investopedia and see how he does for a few months. I think having the account will be OK but he'll need a grown up to actually execute trade orders

[dewolf]

My son started at 16 and has made enough to start his own lanscaping business which he owns freehold. He's been in business now for 3 months and just bought a 994S2 for AU$18K cash. He still trades as well. He just turned 18 last month.

[LeeH]

Custodial account - Wikipedia, the free encyclopedia
5 things to know about custodial accounts for kids - TaxWatch - MarketWatch

[KFC911]

Originally Posted by Chocaholic

...but I think he'll have fun researching and watching his stock picks rise and fall.

Though one has to take "everything" with a big ol' grain of salt, I use Fidelity, and like the layout and "research portion" that it offers...not sure he's gonna get that with a modest investment though. As other have posted...fantastic idea (saving. investing, and being interested in this stuff in general)....good for him!

Originally Posted by Shuie

...picking stocks and trying to time the market is a suckers game.

I done both (mutual funds for years, not any more)....don't agree with the "picking stocks" portion of your post, but you're spot on with the last part (I am NOT a trader but do invest in individual co's. these days).

ps: I'm pretty good though, and actually CAN "time the market" with pretty decent accuracy fwiw...

















It's gonna open at 9:30 and close at 4:00 most days

[Schumi]

When I was younger I tried one of those 'for fun' sites where you start of with X amount of money. I lost interest after a month or two. It's not as captivating unless you got your own, real money in there.

You might also wind up breeding a gambling addict.

[widebody911]

I'm gonna steal that

Originally Posted by KC911

ps: I'm pretty good though, and actually CAN "time the market" with pretty decent accuracy fwiw...

















It's gonna open at 9:30 and close at 4:00 most days

[Schumi]

Related note, I just finished the Ben Mezrich book 'Ugly Americans'. Book about a few 24 year old Ivy leaguers that wind up in Japan gaming arbitrage on the Nikkei and pulling down hundreds of millions of dollars.

As with all Mezrich, it's based on true people and events but fictionalized slightly to make it a better read.

[imcarthur]

We let the Room Monkey use one of our investment accounts to play with on the market years ago. Fast forward to today & he is employed by one of Canada's major banks - in their investment department. The result is far better than we hoped for when we said yes.

Ian

[Rich76_911s]

The only feasible way to do this is for you to run a "synthetic exchange." A few hundred dollars at any brokerage will lead to HIGH monthly fee's and trading expenses will all but make it an exercise in futility.

I like the investopedia idea. You can track his total return and pay out his % return on his capital. So if he has $500 and can generate an annual return of 10%, you pay him the $50 when he closes the position. Only downside is you'd have to pay him his return. Or if he loses 10% take that out of his principal. Much better learning environment than giving E trade most of his money in fees and expenses.

My son is WAY too young at this point but I'd like to do something like this article illustrates when he is older:

Fee Creep and High Interest Rates at the Bank of Dad - Bloomberg

[1990C4S]

Originally Posted by imcarthur

We let the Room Monkey use one of our investment accounts to play with on the market years ago. Fast forward to today & he is employed by one of Canada's major banks - in their investment department. The result is far better than we hoped for when we said yes.

Ian

I was sure that story was going to end very differently....

I think (esp in the USA) that this is a good direction for secure long term jobs with benefits.

[KFC911]

Originally Posted by Rich76_911s

The only feasible way to do this is for you to run a "synthetic exchange." A few hundred dollars at any brokerage will lead to HIGH monthly fee's and trading expenses will all but make it an exercise in futility.
....

Not Fidelity if one simply bought a few positions an monitored them...it would be a good vehicle for encouraging him to learn how to "invest" and discourage trad...I mean "gambling" imo. My annual fees are insignificant (as stated, I am NOT a trader).

Originally Posted by 1990C4S

I was sure that story was going to end very differently....
.

I thought for sure that Ian would be behind bars by now ...he's just way to cool and collected for that though....just goes to show ya how the hand eventually plays out if ya don't fold 'em early in the game.

[Rich76_911s]

Originally Posted by KC911

Not Fidelity if one simply bought a few positions an monitored them...it would be a good vehicle for encouraging him to learn how to "invest" and discourage trad...I mean "gambling" imo. My annual fees are insignificant (as stated, I am NOT a trader).



I thought for sure that Ian would be behind bars by now ...he's just way to cool and collected for that though....just goes to show ya how the hand eventually plays out if ya don't fold 'em early in the game.

Fidelity has a minimum balance on a brokerage account of $2500 and $8 trades. So with a few hundred bucks that is out of the question. Brokerage houses just aren't designed to have very small amounts of capital. When they do accept small capital levels they impair huge fee's. Which is why I thought doing it solo would be the smarter path. I'd encourage transaction fee's in the imaginary account too.

One can gamble in a fidelity account as easy as you can anywhere else. Truth be told though gambling is a part of investing there is simply no way around it. The good investors make the gambling portion of an investment decision as small as possible, but it's almost always there.

You could pick up some good books for him on the subject as a holiday gift:
Snowball is a biography of Warren Buffet. Interesting & LONG book teaches some investment ideas but won't teach a lot about investing. Though Warren's success is quite the motivator.

The Warren Buffett Way. Is a more instructional book on how or why Buffett chose positions at different times.

The Intelligent Investor. A classic, written by Buffett's teacher Benjamin Graham. A book Warren attributes to changing his life.

[imcarthur]

Originally Posted by KC911

just goes to show ya how the hand eventually plays out if ya don't fold 'em early in the game.

Exactly, Keith. He was 15 or 16 at the time & really showed real interest in becoming a stockbroker (so he could get wildly rich & buy a Lambo). We took a chance & gave him the keys to a 5K retirement investment account. The only rules were: 1) No penny stocks 2) don't lose it. He made money & we split the profits.

With his position now, all of MY trades have to be approved in their compliance dept (where he works) because of proximity rules - since he still lives in our house. ()

Ian

[KFC911]

[QUOTE=Rich76_911s;7801853]The only feasible way to do this is for you to run a "synthetic exchange." ....

Originally Posted by Rich76_911s

Fidelity has a minimum balance on a brokerage account of $2500 and $8 trades. So with a few hundred bucks that is out of the question. Brokerage houses just aren't designed to have very small amounts of capital. When they do accept small capital levels they impair huge fee's. Which is why I thought doing it solo would be the smarter path. I'd encourage transaction fee's in the imaginary account too.
.....

Thank you for correcting me on Fidelity regarding the small amounts we're talking about here...I stand corrected. BTW, I'm pretty sure everyone on this thread is talking about "investing", not any type of high volume trading. Ian's post shows a technique for doing this in a "feasible" manner imo. I would have no qualms about seeding a "responsible" 14 year old's account. One could even put "the minimum required" of their "own" cash in there (hand's off to the youngin'), and then allow the child to invest (manage) their "own" $500 within that account. Lots o' ways to skin a dawg

ps: I'm not arguing with you, just offering a "feasible" alternative like Ian did with "his monkey" .....

pps: Hey Ian...one of these days I want to see another pic of a proud grandfather holding his "Pride and Joy"

[1990C4S]

Originally Posted by imcarthur

With his position now, all of MY trades have to be approved in their compliance dept (where he works) because of proximity rules - since he still lives in our house. ()

Ian

Easily solved. Said the guy paying the rent for three kids...

[berettafan]

It's a great idea but do understand that market movements are about predicting what others will do and not digging in to fundamentals. Hardly anyone talks about fundamentals any more.

One thing ol Barry O' was right about is that wall street is a giant green felt table.

Look at Scotttrade. I think $500 opens an account with them and you can put an app on your phone to monitor the account.

Better yet match his couple hundred and charge interest on your money (say 5%). Let him do the math on that and you will have a kid that knows more about money management than 90% of the US.

[berettafan]

Originally Posted by Schumi

When I was younger I tried one of those 'for fun' sites where you start of with X amount of money. I lost interest after a month or two. It's not as captivating unless you got your own, real money in there.

You might also wind up breeding a gambling addict.

Absolutely true. Poker isn't the same without money that could hurt you even ever so slightly. Investing is the same.