The 2 Most Important Investing Rules People Get Wrong

THE BIG THING I WANT YOU TO KNOW:

Investing isn’t Vegas. The best investing advice I’d give you, your teens, and ALL our clients is that 1) good investing isn’t that exciting and 2) the market dropping isn’t a ‘bad’ thing in the long-run. If you can live by those rules that too many people miss there are A LOT of benefits for your future.

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Our team received a really great question from a listener named David. (Look David, your question made it to the radio! #Famous ) You can ask the Dynamic Money team any question, too.

Here’s what he asked:

Can you give any advice to help get a 16-year-old started in investing and money management?
— David (listens on the Dynamic Money Podcast)
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Great News!

The Best Investing Advice I would Give Your Teenager Is The Same Investment rules I share with everyone

Listen, I have a 15 year-old, so this question made me sit back and ask myself what I’m doing to help my son prepare for investing and money management, and I came to this conclusion:

There are two things that are crucial for your teenager (and you!) to know before as you enter the world of investing:

Investing rule #1. good investing isn’t sexy

Many people I talk to view investing like going to Vegas. They imagine they could win big or lose it all…

GOOD INVESTING IS NOT ANYTHING LIKE A TRIP TO VEGAS!

The misconception that investing is a ‘get rich quick’ scenario hurts so many people. Has that ever happened? Yes, but it is NOT common and it’s certainly not the way you want to try and invest.

I’ve said this before: good, solid investing is boring and is a long-term process. (See: The Key to Good Investing in a Cryptocurrency World)

If your investments feel sexy and like good-party talk, there’s a good chance you are taking unnecessary risks and could hurt your future.

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investing rule #2. the market dropping isn’t a ‘bad’ thing

The market dropping doesn’t mean you lose money, you lose money when you sell your stocks. The value of your stocks may go down, but you haven’t lost money until you sell them at a discounted price.

When the market dips and the value of your house goes down, but you don’t sell and the value comes back up when the market rises again, did you ever lose money? No! But young people are terrified of this. You’re not losing money unless you’re selling it. Are you with me? (I’m not with you.)

More investing advice for parents of teenagers like david!

Okay David, let’s go deeper.

If your teen is working, get them into a ROTH IRA. If they’re not working yet, give them access to see your 401k & other investments.

 
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Whoa! Okay, don’t let them do anything to your 401k obviously, but let them watch the money go up and down with the market.

Whether it’s your 401k or their Roth IRA, let them watch the gains on a good day and the drops on a bad day. Let them get used to that idea so they can shift their mindset to investing as a long-term process. It happens over a period of time.

Our children will more remember what we do than what we say! Show them on top of telling them: “Good investing is not sexy.”

Show your children that the market going up isn’t a good thing and the market going down isn’t a bad thing, it’s what you do.

Shifting that mindset changes everything!

 

Get Your investing on track and give your kids a front-row seat

There’s no better way to teach your kids about finances and healthy investing than to invite them into yours.

I have some clients that bring their kids into our meetings and I love that! Make finances real and tangible for them, so it carries through when they have their own job and their own finances.

The bottom-line is: don’t let your child (or yourself!) fall into the misconceptions of sexy investing or down is bad and up is good.

Make that mindset shift. Rewrite your definition of investing.

Trust me, you’ll find that boring, long-term investing is much more attractive in the end.

 
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What one financial rule do you hope your kids follow?

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