Wednesday, June 25

Rites of Passage

Once upon a time, dad's used to take their son's out to kill lions or deer or stuff. Once people used to say, give some hours of your time to your child, well, now its like give some investing tips to your child, because the most powerful force in the world is compound interest. Now, they help them do their first transaction.

How life has changed. I have been carrying out an experiment for the past 2 years and I can now declare it to be successful. My son is a smart chap, but unfortunately not that much interested in hunting. So we had to turn to intellectual pursuits. For the past 2 years, I have been teaching him about the stock exchange, investments, PE Ratios, industry averages, growth potential, fundamental and technical analysis, diversification, portfolio theory, value investments, etc. etc. He did pick them up quite quickly.

From end of last year, I got him hooked up to a free exchange site and he has been coming to me with his stock picks. His first few stock picks were dreadful and I challenged them with financial logic. Smart kid, he did not blink or get disheartened.

Then after 6 months of this, I was convinced that he has got the hang of it and we have now invested £100 in Anglo Pacific. It is an interesting stock, has diversification built into it but obviously will have a margin cut because of the transaction and management fees built into it. But given the current situation of inflation, surging demand from China and India, demand for minerals and mines can only go up. And he found out this stock all by himself, he has created a nice spreadsheet and has plonked his analysis into it.

I cannot tell you how proud I am of him. My son is becoming a man.

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