Teach Your Kids that Investing is NOT a Game, Ep #193

As a family steward, it is not only important to teach your kids how to invest—but that investing is not a game. With the surge of meme stocks that have gained cult-like popularity, it is easy to get caught up in the rat race. But buying one-off stocks is not the role of a family steward. So what does good investing look like? What should family stewards avoid when it comes to investing? Listen to this episode of Best in Wealth to hear my thoughts! [bctt tweet="Investing is NOT a game—so why are people investing in meme stocks? Learn how to teach your kids that they must invest carefully in this episode of Best in Wealth. #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning #WealthManagement" username=""] Outline of This Episode [1:08] Being a family steward is hard [4:58] The popularity of meme stocks [10:40] Why individuals cannot beat the average ROR? [15:32] What good investing looks like [18:28] Your job as a family steward The rise of meme stocks Have you heard of meme stocks? Meme stocks refer to shares of a company that have gained a cult-like following online through social media platforms. They can also be defined as shares of a company that has seen a recent surge in viral activity, fueled by platforms like Reddit and Twitter. The viral nature prompts retail traders to buy the stock with the knowledge that its share price will likely rise. GameStop was—and still is—the most popular meme stock. We have been conditioned to see these investors in opposition to Wall Street. They want to “Stick it to the man.” But retail investors and Wall Street actually have a lot in common. They both want to beat the market. They want to buy low and sell high. But Wall Street stands to make a lot of money off of meme investors because of trading costs. Many companies offer free trades. However, there are other costs involved. When was the last time Wall Street gave anything away for free? It is all a spin. A long-term investment strategy has little to do with picking the right stocks and everything to do with investing in human ingenuity. Human ingenuity is the engine that drives the stock market. The anti-wall street revolution is not meme investors. It began in academia in the 1960s and evolved into the formation of index funds. The first retail index fund came on the market in 1975. The academics found no compelling evidence that any individual can consistently beat the market, which averages a 10% return per year. [bctt tweet="What does the rise of meme stocks teach us about investing? I share my thoughts in this episode of Best in Wealth! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning #WealthManagement" username=""] Why individuals cannot beat the average rate of return (RoR)? But why do individuals have such trouble beating the average RoR of 10% per year? In transparent stock markets, enormous numbers of buyers and sellers come together to trade. Each side has to feel like they have received a good deal, right? If someone sells me Apple stock, they think selling is the right thing to do. I think buying is the right thing to do. If people did not feel like this, they would not trade. But no one knows the real intrinsic value of any company at any given time. There are too many factors to consider. That is why we say stocks are priced fairly. If you or your child bet on individual stocks, you might win—but you might lose. And you are unlikely to harvest better returns than if you invested in the whole market. That is what your kids need to learn. Markets respond to all new available information that comes in every day. The new price reflects the new information that just came out. Nobody knows when a stock will go up or down. It is a fact everyone needs to acknowledge. This is contrary to what Wall Street and...