A couple of weeks ago, I wrote about what you can learn from the opposite sex when it comes to investing. As with most things, men and women have different strengths when managing a portfolio.

This week, I'm taking it a step further: I'm going to show you what you can learn from your kids. Yes, your kids. Or your nieces and nephews, if you don't have kids of your own.

Children have an interesting perspective about investing: They can really bring you back down to earth and help you recover common sense (because, let's face it, money -- and, specifically, the prospect of making more money -- really makes us kind of lose it, a little bit).

So, here are five lessons you can take from the little ones in your life:

1. Buy Low. Logically, you know this rule. You'd never wait for the price of those shoes to go up. But for whatever reason, people tend to lose sight of this when investing.

"If you go back to March of 2009, stocks had a half-price sale, and kids will tell you that it's better buy something when it's on sale, when prices are low rather than high," says Allan Roth, a certified financial planner and author of How a Second Grader Beats Wall Street: Golden Rules Any Investor Can Learn. "But we were panicking in the streets, selling. Now that the markets have recovered, finally many people have started moving back into the stock market."

Ideally, of course, you want to do the opposite: Buy low, and sell high.

2. Diversify.
Your kids probably know the saying as well as you do: Don't put all your eggs in one basket. For them, it might apply more to the mall than the stock market, but the key lesson remains the same. If you aren't spreading your investments out, or worse, your portfolio is too heavy in your employer's stock, you're asking for trouble.

Many people don't think about it this way, but your job is, essentially, one of your investments, and certainly the one with the highest return. If your company goes down -- and history shows us that's always a possibility -- you don't want the lion's share of your investments to go with it. Keep company stock to 5% or 10% of your portfolio, at the most.

3. Lend With Caution.
Or as a kid would say, don't lend money to someone who won't pay it back. This rule has two meanings, at least to me: First of all, keep your risk in check. Yes, you have to weigh your individual tolerance for risk, and some people like taking chances. That's fine, but don't let greed get in the way of common sense.

The second way this factors into your portfolio? Don't tie your money up in low-yield investments that won't beat inflation. If you do that, you're losing money. Instead, set yourself up with an emergency fund (here, the interest rate is less important than easy access) and then set up a portfolio that will beat inflation. That means an age-appropriate mix of stocks and bonds.

4. Don't Play the Game Unless You Understand the Rules. "We adults sign up for an annuity with a 373-page prospectus, not realizing that the actuaries and the attorneys aren't writing that thing to protect the consumer. I've never met a consumer who understood what they bought, and I've rarely met an agent who understood what they were selling," says Roth. This goes for all investments you don't understand: Ask questions, and if it still isn't clear, move on.

5. Keep It Simple. An overly complex portfolio isn't necessarily a better portfolio -- and in fact, in many cases, it's worse. Yes, you want to diversify, but you can do that with three to five funds, says Roth: A total U.S. index fund, a total international index fund and a total bond index fund. "With those funds, you can own the entire world. People think they have to have 53 mutual funds, but that doesn't mean they're diversified."

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May 29 2011 at 1:31 AM Report abuse rate up rate down Reply


My wife was fired from her job mid 2008. I was fired from my job Jan 3, 2009. Of course the first few weeks were a shock and I was on the verge of falling into depression. I pulled myself out of bed one morning with the realization that I really have the opportunity of a lifetime! I have the time to do what I really wanted and enough money coming in to stay afloat while I chased my dreams.

1st I wanted to get into shape. I went for a run and was able to go almost 1/2 mile straight. I kept running and got up to about 3 miles but realized I would never accomplish "getting into shape" unless I set a goal and did whatever it took to achieve it. I decided to set the high goal of running a full 26.2 mile marathon, even though I haven't ever ran a race longer than a 1/2 mile track meet in high school almost 20 years ago. I completed my 1st marathon on Oct. 24th, 2009.

2nd I wanted to start my own business. I had a construction background and little investment money. I decided to go with a sweepstakes directory. I entered some before with some success and thought with as bad as the economy is, I bet a lot of people are looking for a way to get some extra money themselves. A few thousands bucks later my website SweepsPlay went live. I had to go back to work because it doesn't make enough to support us yet, but it is growing. Hopefully in the next year or so my wife and I can be home together again and spend time doing what we love without the stresses of money on our shoulders.

My point is that if you have lost your job, it is tough. I know, I have been there. Just keep your head up. It could be the best thing that ever happened if you take advantage of the opportunity. If you still have your job, prepare for the time you may not have it anymore. Good luck..

February 08 2011 at 1:43 AM Report abuse rate up rate down Reply

Kids know those things...right. What a stretch to find an angle for an article!

February 06 2011 at 10:07 PM Report abuse rate up rate down Reply

never double down. it's true. good way to lose your azz. put this in your next article. make it 6 thinks to learn from kids.

February 06 2011 at 5:02 PM Report abuse +1 rate up rate down Reply
marta renna

look hehre! you will bee shoocked!


February 06 2011 at 10:43 AM Report abuse rate up rate down Reply

What a stupid article. Learn from kids how to invest???? You write really dumb stuff to get readership up I guess.

February 06 2011 at 2:43 AM Report abuse rate up rate down Reply

Jean, you are off base. I am a CPA and each year contend with children that go and do a tax return with no consideration to parents. We have to amend and file parents on paper because the child blocks them from e-filing. Why did they do it? Because they want a few dolloar to spend, not invest or paydown student loans. Your article is cute but not realistic.

February 05 2011 at 12:56 PM Report abuse +1 rate up rate down Reply

My son is only 14 years old.He purchased 200,000 shares of sirius or SIRI stock for 5 cent,and today the stock is worth about $1.67. Guess how much he has made.? He has made over $300,000.He has more money than i have in my 401K.

February 05 2011 at 12:21 PM Report abuse +1 rate up rate down Reply
2 replies to wayne's comment

Congrats on his bravery, Sirius had some major worries at that time and could have gone to debt holders like many major companies did in bankruptcy. If he works at it, he could be a millionaire by the end of high school and only work if he wants to.

February 05 2011 at 6:12 PM Report abuse rate up rate down Reply
mighty wizard

just curious where did ur son get the 10k to invest at age 14, i had a paper route from age 12 to 14 and saved about $500 bucks as it paid about 25 bucks a month.

February 05 2011 at 9:35 PM Report abuse +4 rate up rate down Reply

Dear Jean, Do you have kids? Obviously not. Learn about investing from kids? Boy are you nuts. Kids want things. They don't consider the price, if its on sale or not. Its a process of maturing over many years that kids learn self control and to resist that childish urge to have something they see ignoring every possible logic offered to deter them from their desire. You need help and your article sucks.

February 05 2011 at 11:01 AM Report abuse +3 rate up rate down Reply