Dad’s Dollar Diary #5: Kids Googled Starbucks Over Index Funds

Starbucks-switching-to-Google-for-hi-speed-wi-fiDear Diary,

In today’s post, I want to talk about my kids’ portfolios and the trades we made over the past year. As a bigger goal, I am in the process of creating an ongoing Dad’s Investment Journal page on our blog, so I’m busy trying to back-fill it with some thoughts about all of our investments over the past year. But back to the kids’ portfolios.

Last year, Grandma and Grandpa gave both of our kids a small amount of money to start their own savings and investment accounts. So I took our kids to Schwab to open new custodial accounts. I filled out and signed the new account applications and the kids both endorsed their checks from Grandma and Grandpa. Anyways, with brand spanking new accounts, these are the investments we made and the thoughts that went into them:

August 11, 2015 (SCHX, SCHA, SCHF): We talked about how they are still very young and have years and years for their investments to grow. So we decided that we wanted to invest with an aggressive asset allocation profile that is 50% US large cap equity, 25% international equity, 20% small cap equities, and 5% cash. To teach them how to diversify, I told them that we would invest most of their money into index funds and some portion in individual stocks. So we first bought large cap, small cap and international index funds to start out their portfolios. We chose these Schwab index funds because they are commission free and have low expenses. We wanted to invest the money over a few months, like dollar-cost averaging, so we invested about half of the funds and reserved the other half to be invested over the following months.

August 24, 2015 (STARBUCKS CORP and GOOGLE INC CLASS C): The market had a big correction on August 24, so we used this as an opportunity to make our next investments. I told the kids you can’t time the market, but big corrections are buying opportunities. To reinforce the message that picking stocks requires research and analysis, I told the kids to choose a stock from my pre-researched list of forever stocks that we would buy and hold for a long, long time. Natalie and all of her friends love Starbucks, so we purchased SBUX at $50.20/share. Matthew always uses Google and is a huge fan of YouTube, so we purchased GOOG at $585.33/share.

January 13, 2016 (STARBUCKS CORP and GOOGLE INC CLASS C): The market corrected again at the beginning of the year, so we decided to make another purchase. The kids both wanted what the other had so we purchased GOOG at $708.36/share for Natalie and SBUX at $58.05/share for Matthew.

May 16, 2016 (SCHX, SCHA, SCHF): Originally, we had bought index funds to teach them about asset allocation, but they didn’t really look at their accounts. They humored me for the first couple months when we received our monthly statements, but they were really only interested in SBUX and GOOG. So now we’ve changed the strategy just to invest in only our forever stocks. This way they have a couple of stocks that they can follow and be interested in, rather than boring index funds. The portfolio will be concentrated, but it’s a small portfolio. As a result, we took some losses and sold our index funds: SCHX (-$0.79/share), SCHA (-$3.73/share), and SCHF (-$3.23/share). We may add more to our SBUX and GOOG holdings or look to start a new position in CSCO. I think CSCO has some growth but also has a very attractive 3+% dividend that was recently increased 23%.

July 21, 2016 (STARBUCKS CORP): We added more SBUX at $57.43/share to Natalie’s account. We still have some cash remaining to add to other positions when the price is right.

July 28, 2016: I told the kids that Google announced their earnings after the close and the stock jumped up $30 in after hours trading. The both replied, “We own Google, right?” When answered them in the affirmative, they both yelled triumphantly, “Yes!” So maybe it’s better to have individual stocks for the kids to get excited about. We can teach them the boring stuff, like asset allocation and diversifying risk, after they get hooked.

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