How to nurture a budding Buffett
Berkshire Hathaway Chairman and CEO Warren Buffett listens during a hearing before the Senate Finance Committee on Nov. 14, 2007.
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Tess Vigeland: On the other end of the spending spectrum some stocks are selling for less than a footlong at Subway. What better time to buy shares for the folks who are truly in it for the long run -- kids. There's very little to lose and a lot to learn. Sally Herships has more.
Sally Herships: Some people idolize rock stars, for others it's actors. But for 14-year-old Alex France, Warren Buffet is the man.
Sylvia France: How bad do you want to meet with Warren Buffet?
Alex France: It would be a dream come true. It's just, it would be awesome.
Like Warren Buffet, Alex and his mom, Sylvia, live in Omaha. They've actually seen the billionaire investor at the Dairy Queen. And like Buffet, Alex is interested in getting an early start on his investing. So his mom is taking advantage of the Wall Street roller coaster to teach him about the market. And Alex is hooked. He's got his eye on a company that produces steel for construction.
Alex France: With Obama looking to spend a lot of money on building infrastructure that looks like a good investment.
One that Alex hopes to take advantage of. He's trying to talk his mom into letting him and his brother pool their cash to buy stocks. Sylvia wants her son to save his money for a car. But she admits with so many stocks undervalued it's a great time to buy. After all, Alex has years to make up for any bad bets.
Sylvia France: The old adage goes, no guts, no glory. With any kind of possible profits, there's always some inherent risk.
Andrew Ang: This is the sale of the century. We're talking Circuit City clearances here.
That's Andrew Ang. He's a professor of finance and economics at Columbia Business School. He's also the parent of a newborn girl. So, naturally, he's thinking of the future. And he says now is the right time to buy, if it's for the long term.
Ang: You see all these headlines and they're all real. It's very scary. But the economy will recover, companies will be generating cash. And in the long run these things will pay off.
But even when you've got years to see returns picking stocks can still be risky. It's hard to know why a stock's price drops. Ang says it can be a few reasons -- antsy investors or an unpredictable economy.
Ang: We just don't know. But that's why you want to mitigate that risk. And you want to hold a big portfolio. And there are very easy ways to do that. In fact, you can go and buy a mutual fund. Or an index mutual fund that holds for you a large number of stocks.
New Yorker Alessandro Siciliano is doing just that -- spreading out his risk.
Alessandro Siciliano: One share of Coke, six shares of GE, and was that it?
Well, he also has a share of Apple. His mom, Rosemary, bought it for him at Christmas. And ever since the two have been following the market closely and making buys. Alessandro reads the business news everyday.
Herships: And how old are you?
Alessandro Siciliano: I'm 14.
Rosemary Siciliano: This is a kid who's been listening to Steve Jobs's keynote address in its entirety since he was 8 years old.
Alessandro Siciliano: I got my Apple when I was like in fourth grade.
And he's owned a couple of iPods. It's all part of Rosemary's investment strategy: Buy what you know.
Rosemary Siciliano: I thought it would be better for Alessandro to buy products and things that he uses.
Alessandro's mom says this year's events have taught him a lot. He's learned about compound interest and how to calculate percentages. And over in Omaha, Sylvia says her son Alex has learned too.
Sylvia France: I think it's just a great time to learn, in good times and in bad times rather then studying it in books.
Alex France: Yeah, definitely, it's a topic that we can speak on at the table. It's just . . . it's something that brings us together as a family.
Sylvia France: I know that sounds kind of corny, but it's true.
And it looks like Alex is ready to tackle Wall Street. He just won his high school's stock market game, hauling in 13,000 imaginary dollars. He even beat his teachers.
In New York I'm Sally Herships for Marketplace Money.