Well my friends…today is a special day. I recently had a reader named Andrew reach out to me with a really cool request. He's a high school student, and he wanted to share his story on M$M to fulfill a requirement for one of his classes.
Now if you remember, waaaaay back when I started M$M (actually just three years ago ha), I was a high school band director! The whole reason I wanted to start this thing was to teach young people how to avoid student loans like the one I had and get excited about personal finance early. I started out by teaching personal finance lessons to kids during their advisory time because the curriculum that the school wanted me to teach was ridiculously lame.
I didn't even know what Andrew wanted to write about, but I knew I was going to let him do it as soon as I opened his email. I get these requests every once in a while, and now just felt like the right time to encourage a young person to take their shot and reach thousands with their message about money.
So enjoy! Please show my dude Andrew some love in the comment section – I think there are some valuable life/investing lessons that we can all share with him. Not often you see a high school student care about personal finance. This post actually reminded me of a student I had who kept swearing he'd get rich via penny stocks and preached to me about how incredible they were every day (sadly…he did not become a penny stock millionaire but it wasn't for lack of trying haha). ~M$M
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Everyone has had the dream–the dream of ‘making it’ without making it into the real world. The dream of achieving ‘success’ while still in school, in the ways that Bill Gates, Mark Zuckerberg, and Steve Jobs had. The question for most is how to actually make change – how to create something out of nothing.
Though everyone is told to “work really hard” to achieve this form of success, nobody ever explains where to start, and what to “work really hard” at. To find answers to these questions, I, similar to many kids across the United States, scoured YouTube for success stories, finding numerous accounts of kids who ‘made it’ through investing in the stock market.
Naturally, I was intrigued.
Being 13 at the time, I had no income from any jobs, relying on the $20 here and there from birthdays and special occasions.
Throughout my whole childhood, I managed to collect and maintain roughly $500. This money was sacred–a means of connecting with the real world, and in my head, freedom.
However, after watching videos illustrating child prodigies who have made millions of dollars from less than $1,000, the only thing on my mind was the upside of investing.
Never did I contemplate the possibility of losing this money.
I had a simple problem, however. I had absolutely no idea how to start investing, or the actual methods required to interact with Wall Street. Yes, I understood that if you invest $100 in a penny stock that increases 1,000%, you will be left with a $1,000 investment and that ‘shorting’ stocks are essentially the opposite.
So, I went to my parents for help. I knew that my dad invests frequently, and I made the connection that he would likely be able to set me up with my very own brokerage account.
After some persuasion, my dad and I drove down to the local TD Bank and opened a custodial TD Ameritrade account under his name (as it is illegal to self-invest until you are an adult).
We then linked a TD Bank account to this brokerage account, and I deposited my life savings ($500) into the bank account. We then configured the online side of things, logging into my Ameritrade profile at home, and finally, I had full access to my very own brokerage account.
I felt like a teenager who just got their JOL, as the utter freedom associated with being able to steer my investment in any which way I wanted overwhelmed me. I knew I had to try ‘driving’ my investment by allocating it into a penny stock with a large upside.
I just didn’t know which one to choose, as there are thousands upon thousands of public startups.
Ironically, my friend began investing at the same time, and we went on a search together to find such a stock. One day, he showed me the news reports of a biotech company that he found, who stated that they would be able to print 3D organs and make huge advances in their area just with the help of Wall Street. In fact, they weren’t the only ones making this claim, as various investment sites vouched for their inevitable success.
In our minds, there was really no reason not to invest, as this stock seemed perfect in every way. We both agreed that this stock was a great choice and plowed our money into it.
I went to sleep that night excited about my accomplishment, knowing that was my first successful investment.
I knew I would tell my friends about my accomplishment and reinvest the money I will make into more penny stocks, eventually making thousands upon thousands of dollars. I saw myself in high school, buying myself a new sports car and interviewing with news stations about how to make it on Wall Street.
The next day at 2:30, I opened my TD Ameritrade app and saw “-16%,” the red invoking panic and feelings of strong discontent. When I sold my shares the next day, I was left with a humble $200 in my bank account. I told my dad about this and assured him that I will never be investing again. He seemed to like this idea.
After a little while, we looked into the penny stock and tried to figure out why it was such a lemon. Turns out, most of the money that the company raised went to the executive salaries, with only a small portion going to research and growth.
This information was found by doing an advanced search in Yahoo finance to find their complete balance sheet. In no way whatsoever was this information easily available to the public who had no prior knowledge of investing.
Thus, as such information was available, it is clear to me that making smart and profitable decisions on Wall Street is possible but requires a certain knowledge on the evaluation of companies and complicated market trends.
Personally, I plan to put aside investing with my own money for the time being and spend more time learning from people with more investing experience than me. Hopefully, by the time I am nearing the end of college, I will be ready to invest for real and create a better future for myself.
If you don’t know how to set up an investment portfolio, it is better to stay out of the markets and learn from those with more knowledge than you.
-Andrew D.
About Millennial Money Man
Bobby Hoyt is a former band director who paid off $40,000 of student loan debt in 18 months on his teaching salary and then left his job to run Millennial Money Man full-time. He helps other Millennials earn more through side hustles, save more through budgeting tools and apps, and pay off debt. He is a personal finance expert who has been seen on Forbes, Reuters, MarketWatch, CNBC, International Business Times, Business Insider, US News, Yahoo Finance, and many other personal finance and entrepreneurship media outlets.
Comments
Jorge @ Money Luchador
Sounds like you learned one lesson which is to do your research and don’t stop researching and learning what the company is doing and how they’re spending your investment. The other thing I’d say is patience is definitely key. Stocks like Netflix, Amazon, Apple, etc. all started off small. Even Facebook started off back in 2012 at $38, dropped as low as $19 within that first month of trading, and is now worth $200. I knew people who sold early and are now regretting it.
In school, put yourself out there. I landed an internship/job with Goldman Sachs in college which ultimately transformed by my view on money, investing, and finance altogether. The experience was invaluable.
Andrew
Thinking about it, patience would have really helped me out here as the stock price increased after I sold it. I’ve recently made a linkedin to begin the “putting myself out there process” so I’ll definitely keep that in mind. Thank you.
Bert
Andrew, good post. I agree that if you don’t know what you’re doing then it is definitely best to stay out of the markets. Two books I would recommend you read are: A Random Walk Down Wall Street by Burton Malkiel and The Intelligent Investor by Benjamin Graham. Look into investing in index funds and start with one that tracks the S&P 500. They are by no means a “get rich quick” way of investing but if you are patient and continue to invest every month you are “almost” guaranteed to profit. Oh, and stay away from penny stocks! Best of luck to you.
Millennial Money Man
Thanks for sharing with him Bert!
Andrew
“A Random Walk Down Wall Street” and “The Intelligent Investor”, got it. I’ll make sure to research index funds now that you say that, and definitely won’t be touching penny stocks in the future. Thank you.
Edwar
I concur with Bert! Thanks for sharing your story Andrew, and don’t feel bad. I had a somewhat similar story at age 35, getting ahead of myself with the overly rosy forecasts of 3D printing. “If you wear rose-coloured glasses, red flags just look like flags.” Thankfully, I had 10 successful years of index investing before venturing into stocks, so those losses were not a setback.
Edward K. Motley
Also, there was another point in your story that I did not see other comments address (although your additional research, learning how that company “operates” validated pulling the money out so quickly). When you invest in the market, it does not matter if that index fund (or ETF or stock) is down the next week, next month or even the next year, but if you are holding the investment for the long-term (as you would with an index fund), it matters where the index fund will be 20+ years from now! The probability that it will be significantly higher is very strong. Hence the reason Bert described index funds as an “almost”-guaranteed profit.
C. Jamal MKV
Another great is “The Millionaire Teacher” by Andrew Hallam. Awesome read and very humorous as well.
Colleen
This was a great post, and it’s awesome to see someone so young paying attention to investing. I definitely could have cared less about investing at that age. I know $500 seems like a lot, but you actually were in a good position to learn this lesson, and in the grand scheme of things, you will be able to recover with the new knowledge you’ve gained.
Millennial Money Man
Ha yeah I didn’t care about investing at his age either! I wish I had….
Andrew
I really appreciate that. I think that’s also a really useful mindset to have about this moving forward. Thank you.
Jerry
Andrew,
That was a solid post!
I think the excitement of the possibilities that investing offers blurs our vision at times. I was there once. It’s hard to take the emotion out of it when you first start, and even harder when you’re trading with funds you can’t bare to lose.
Don’t give up. You’re already way further ahead than most.
My suggestion would be to open a demo account. http://Www.Investopedia.com offers one I used during a college competition.
In addition, many brokerages offer paper trading as well. Practice losing with fake money. It’s not called “winning” after all. All traders have losses. The ones that stay in the game learn how to manage risk and own up to their losses.
Jerry
Andrew
Sounds good, in the future I’ll make sure to invest based on logic rather than chasing upsides. Thank you for the demo investopedia account as well, I’ll set one up right after I submit this reply. Thank you.
Damian Miller
Hey Andrew!
First of all, great post! I’m in my late 20s and know very little about investing (you probably know more than me at this point, in fact, since you’ve actually gone through the process), but I did want to offer a bit of encouragement.
I know right now it might not seem like you gained much of worth from diving into the stock market, especially given that you lost over half the money you invested, but I think it’s something you’re going to look back on in ten years’ time as a truly life-changing experience.
At a time when most of your peers’ interest in money is generally limited to finding new and increasingly frivolous ways to spend it as fast as they make it (and I know, because that was me at your age), you’ve started cultivating a thought process around money that involves letting it work for you, building capital, and generating wealth. The very fact that your first impulse was to invest that $500 instead of blowing it on a new game console demonstrates that you’re on the right path, at a far earlier age than most of us ever were.
It might not have worked out this time, and it won’t be the first time that it won’t, but if you continue to hold onto that thought process, resist the temptation to go into debt for stupid stuff like a new car right after college (again, this was me), and seek ways to save money, live frugally, and invest for the future, you’re going to go really frickin’ far.
Anyway, again, great job on the post, and thanks for sharing your story with us! Good luck in your future investing endeavors, whenever they may be. (Also, you have a way with words–ever think of starting a blog yourself? Just don’t quit your job to do so, I hear that’s not recommended around these parts. :P)
Darious Nkwasibwe
Great thoughts here. Thanks for your comments.
Andrew
Wow, that was really deep and insightful and really made me think big-picture. It seems really easy to slide into debt with the mentality that I had during the purchase of this penny stock, and I think I can relate that to when you purchased a new car out of college without considering the financial burden. I’ll keep this in mind. Thank you.
Adam @ The Wealthcents
Andrew,
First of all, that is great that you are taking an interest in personal finance and investing at such a young age. This will definitely serve you well in the future. Here are a few words of advice I’d provide that I learned over the years:
– There is a big difference between investing and trading. Trading is essentially trying to time the market and investing should be viewed as buying a stake in a company that you think will appreciate over time. Trading is extremely difficult and most people who do this under-perform the market. A great book I’d suggest is “The Little Book of Common Sense Investing” by John C Bogle. Try to focus on investing versus trading since it is very difficult to get rich quick in the market.
– Try to buy multiple stocks (or better yet an index like the S&P 500) to diversify and spread out your risk. Even the best investors don’t guess right every single time.
– Keep learning! It is great you are taking an interest in investing; however, the maybe sad truth is that the best investing can be boring. Buying an S&P 500 mutual fund will likely outperform buying individual stocks.
– Think about the return of your time as well as your money. If I spend 10 hours researching a stock and invest $500, the return on my time is probably pretty low. Let’s say the S&P 500 gives a 10% annual return and the stock I pick returned 15%!The S&P 500 would be worth $550 when my stock would be worth $575. I essentially spent 10 hours for $25. That’s only $2.5 per hour!
– Also, don’t let this one bad experience discourage you from investing. Everyone investing in the market loses money some days, but if you have a sound strategy you will do very well over time.
Adam
Andrew
Trading vs Investing, that’s a really interesting idea to me and I’ll definitely look into that book. With that mindset I definitely wouldn’t have plowed money into that penny stock. Also, the return on time is interesting, as you view it as the time spent researching vs returns, which makes sense really as once the money is in the stock no more work needs to be done for the time being. Thank you.
Edward K. Motley
I fully concur with Adam, especially the fourth bulletpoint. The lesson there was not necessarily that stock selection is not worth the time invested, but mostly the point was to be aware of the time spent doing it. You may not find its return to be worth your time. It is time taken away from discussing movies or playing video games. If you only invest to turn a profit, those hours poured into research would be like a part-time job, so your freetime is better spent on fun and your money is better placed in an index fund. But, if stock selection becomes a hobby, then any above-market returns may be worth your time invested. There is a certain level of enjoyment achieved out of it. That is the reason you find so many videos and articles about investing; it can be a lot of fun!
The Savvy Couple
I can totally relate! When I was 15 I put $1,000 into the stock market in companies I had known nothing about.
Within 3 months I was literally left with under $100.
Huge lesson in my life I would not change for anything.
Andrew
We can definitely relate there. I appreciate the lesson mindset as well, it’s very helpful for me getting over losses such as this one. Thank you.
ThinkingAhead
That $300 loss may have saved you from losing thousands or hundreds of thousands of dollars over your lifetime. It’s a cheap lesson and money well spent.
Advice: Read J L Collins stock investing series and stick to index funds. Also, invest in yourself by excelling in school and preparing for your career.
Andrew
I’ll definitely take your advice with “JL Collins stock investing series,” and I appreciate the idea that this was a valuable lesson. I’ll make sure to prioritize school for the time being as I am in high school currently. Thank you.
Carrie J. Hall
Hi Andrew – great post!
My recommendation is do not quit!… just be very cautious, do allot of research, talk to the educated and don’t invest “everything”. If you wait to get back in until college you will be 5-7 years behind of investing. Others who have succeeded greatly use caution, persistence and small steps win!
I like the idea above of paper trading. Maybe set a goal of paper trading for a year, earning money to invest 10% – 30% every year when ready. The possibility of paying for college
Andrew
Wow, I really like that idea (paper trading for a year while working sometimes and then moving to the stock market once again.) I really appreciate the motivation and kind words. Thank you.
Mike
I agree with what most of the commenters are saying. However, I would recommend that you look into DRIP investing, especially at your age. Simply, DRIP investing is an easy way to get started investing. You buy stock directly from the issuing company with NO commissions and all dividend are reinvested as they are paid. You put in small amounts of money ( say $20 monthly) to dollar cost average your investment,and over time( say five years) you will be surprised by how much your investment have increased. Commissions can crush a small investor, so with No commissions and a low monthly investment it’s a win win.
Good luck to you, and don’t let ONE bad investment turn you off. Over my career I have lost thousands of dollars in let’s say poor investments and have gained hundreds of thousands in good investments. Remember, like in baseball NOBODY bats a 1000, you can’t hit a home run every time you are at bat.
Andrew
Wow, I’ve never heard of DRIP investing before, and that sounds very intriguing as commissions significantly hurt my investment being $10 through TD Ameritrade. Also, the $20 monthly input sounds very doable to me. I really appreciate the technical advice coming from a seasoned investor, and will look into this. Thank you.
Laci
Nice article Andrew, it takes a lot of courage to share your story! Let me share with you what I did with money at your age. When I was 13 years old, I had my own babysitting “business” and if I may say so, I was pretty successful. All the money I made babysitting went into an envelope in my sock drawer, that is until my parents found several hundred dollars while putting away laundry! After some explaining on my end (apparently they didn’t know how lucrative babysitting could be for a middle schooler) my mom walked me down to the bank where my mom and the banker taught me a lesson in interest, and we put my money in a CD. That money grew enough to make a big impact when it came time to pay for college. The lessons I learned that day, I still value today. A couple decades later and I still cringe at the lost earning potential of that money sitting in my sock drawer.
It’s okay to make mistakes but the important thing is what happens next–learning from them. You’ve been given some good advice today and it sounds like you have a strong support system at home. I’ll be curious how you tell this story in 10 years. Good luck Andrew!!
Andrew
Wow, I see what you mean with the potential of money lying around when used in smart investing. Moving forward I can definitely use all of this advice to improve my mentality around investing and safely get back into the markets. Your story was also a very cool and interesting read. Thank you.
Christa Szabo
Hi Andrew. Fantastic post!! I didn’t really start teaching myself about stocks and investing till I was about 27, so your learning curve is already through the roof!!
I know it hurts to see that money almost disappear overnight sometimes, eventually you’ll learn not to tie your emotions to your investing so you can make well researched and rational decisions with your money that will earn you more in the long run
Another way to look at stocks are the dividends that they can accrue. You certainly don’t get rich off dividends, but you can roll that money back into to same company you already have stock in or reallocate the funds to another stock. In a sense, you’re investing someone else’s money to make more money for you and for every investor/entrepreneur, that’s the name of the game
Also, try looking into options contracts. THIS IS NOT TRADING OPTIONS!!!!! These are what options traders buy to “control” your stock. They pay you so much to have a sort of say in your stock, like a form of rent. At the end of the contract, you either sell your stock for a set amount, or you keep the rent they paid and you keep your stock. Most of the time, options traders don’t want to initiate the contract, so you’re left with the rent they paid you and your stock so it’s one way to make money from your stock that’s higher than your dividends. In order to do this, you do need 100 shares of a company, but look at Mattel. They trade anywhere between $13-$16/share, meaning you only need about $1,300-$1,600 plus trading fee. Seeing as you started out with $500, I have no doubts that you’ll be able to save up enough for a company like that to try out this method. I DO recommend you do your own research on the matter so you have aore comprehensive understanding on the subject.
Best of luck!!!!!
Andrew
Yeah, rational mentality seems to be crucial to smart investing. I really appreciate the advice on dividends, as I never really thought about them too much before. I also really appreciate your suggestion of looking into options contracts, they seem very interesting to me, and I will definitely research them before I get back into the markets. Thank you.
Matt
Enjoyed your story!
Congratulations on a life lesson! Losing teaches us more than winning.
Something that has absolutely revolutionized my investing is this: Find the master of your space. Buy a membership to his premium content and listen to him.
80% of the money is made by 20% of the people. Get in that group. Or else ?
Andrew
That makes a lot of sense actually, one will naturally improve through learning from those better than them. I believe that this blog really offers a direct way to learn from that 20% with all of the insight I’ve gotten about this post, so I really appreciate this opportunity. Thank you.
Cooper The Millennial
Knowledge is power for sure. Certainly with investing it takes time to understand the markets and what they are going to do as well as what investments make sense.
I applaud Andrew for thinking about this at such a young age. He will be well ahead of his peers if he continues to learn from this blog and what other investments are out there for him!
Andrew
Thank you!
Jennie
Hey there, I loved that you are sharing your story! I’m 21 and just started investing a year ago. I think the absolute best way if you are going to invest is index funds! Individual stock picking is almost like gambling, but research index funds, dump some money into one such as VTI (a total stock market fund of thousands of companies) and then let it sit! I actually started with an app called Stash, the fees are about $1/month and then I got to choose index funds and they titled the index funds in different names such as Delicious Dividends and other things like that. It is kind of a beginner platform and you’ll want to move into something better over time but its a great way to get over the scariness of a big investing website’s platform. Just a thought! (I’m not being paid to post any links or anything, just my two cents) 😉
Andrew
I really appreciate that, index funds definitely seem to follow a more rational approach to investing. I’ll make sure to download Stash, I appreciate your genuine suggestion of it. Thank you.
Chonce
I would’ve been so upset if I lost my life savings at such a young age! BUT, better to learn that lesson earlier than later.
Andrew
Yeah, I was surely upset, but I think this lesson will definitely help me out long-term. Thank you.
Bob at The Frugal Fellow
Ugh, penny stocks. In the vast majority of cases, they aren’t worth anything because, well…they aren’t worth anything. Index funds are the way to go. But I’m sure you know that by now. 🙂
Anonymous
Yeah, I’ll stay away from them in the future for sure, index funds sound good as well. Thank you.
Andrew Coronado
Andrew, the fact that you’re thinking about investing at all at your age means a lot. My best advice would be to limit what you put into any single stock to a bare minimum. I highly recommend sticking to quality mutual funds and continuing to invest over time in such funds. You won’t read articles about minute made millionaires using this method, but you also won’t go broke with such high risk investing like in single stocks. The simple fact remains that statistically speaking, the vast majority of millionaires accomplished their savings with this kind of long term investing. Moreover, when you jump in and out of single stocks, it is nothing more than luck; try as you might, no one can time the market. Do you do well in Vegas? Most don’t, and playing single stocks is the same thing. You have to decide when to cash out and walk away from the roulette table or lose your butt. Both are simply gambling; stocks are just more socially acceptable. I have a very few select single stocks in my portfolio currently but if it all went away, I’d still have 95%+ of my savings in tact. Try to avoid the false allure of fast money. Many have went broke chasing that illusion. Good luck sir!!!
Sam
Hi Andrew, great post and thanks for being so candid – everyone remembers their first 🙂
It is true what they say though, we learn more from failures than successes and your story is a good example of that. Good luck to you and enjoy college!
John Cullen
I would say that investing in penny stocks or OTC stocks when you’re new at it is not the way to go because of the volatility and instability. Maybe consider investing in an index fund such as the S&P or blue chip stocks that have an acceptable dividend of around 3% to start. As you get older maybe consider setting up a trickle account that allocates a percentage of income that you’re comfortable with to more stable stocks. Time is on your side.
Teena
The key to success in the trading business is you should keep control of your emotions. You have to be patient and should react to changes very sensible. Wherever you have invested your money into, you should do proper research on their financial history. These basic factors, if followed will help you to stay in the market for a longer period.