Starting Early is More Important than IQ for successful investing

Two cents'worth

Starting early is more important than IQ for successful investing

By Dick Davis, AUTHOR

THE stock market is really a young person's game because young people have so much time to get it right. Youth is a big advantage and it's a message we should be getting across to our children.

Syndicated financial columnist James Glassman (TCSDaily.com) says: 'After 30 years of studying finance, I have found few eternal verities, but the most important - the Golden Rule of Accumulation - is this: Start early!

Time is the most important weapon in an investor's arsenal.'

At the 2005 Berkshire Hathaway annual meeting, Mr Warren Buffett said that the age at which one begins investing is the best determinant of success, not IQ. Only youth can afford the luxury of making mistakes with enough time left over for losers to become winners. Ideally, all our investing should be done before the age of 20, with our mature years spent reaping the rewards.

Instead, it's done in reverse. We usually have neither the money nor the smarts until we're well past our youth, and this is unlikely to change.

If you didn't start early, your children can. It's one way to help put your children on the path to a better life, and it doesn't take much. Since the youngest years are the most impressionable, starting them off in their pre-teens or teens can trigger a lifelong interest in investing. They can buy as little as one share of stock, but it should be a quality stock likely to go up over time and one that the child can relate to, such as Disney or McDonald's.

What's important is to just get started, not on paper, but for real. With his own money at stake, the child can begin to experience the up and down emotions that, hopefully, he'll learn to deal with in time. Checking out the stock price will expose the child to other financial information on the Internet or in the business section of the newspaper.

The sequence of exposure is important. Buying shares comes first, the homework comes second.

The other way round risks a quick turnoff from confusion or boredom. Websites like buyandhold.com, sharebuilder.com and firsttrade.com make it easy to get started. It's the excitement that comes from the child seeing his own money become more money without doing anything that's the big energizer. It's a turn-on that can spark a lifelong interest in investing.

Excerpted from Dick Davis' The Dick Davis Dividend, published by John Wiley & Sons.