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Subject:  It's Never Too Soon To Start Date:  2/18/2012  4:13 PM
Author:  Milligram46 Number:  70167 of 75523

So my daughter turned 12, and I certainly wish my parents did a better job of explaining money to me than they did. In the interest of not repeating those mistakes, I opened a ShareBuilder account for my daughter - but she did most of the work.

METHODOLOGY:

I printed out the list of the 2011 Fortune 500. I figured for a 12 year old primary research into sectors, intense TA, and crawling through prospectus after prospectus would make her head explode.

I told her to go through and pick 20 to 30 companies that interested her. Pick what you KNOW, pick what you UNDERSTAND, pick what you like. Her choices were:

Chevron, General Motors, AT&T, Verizon Communications, Home Depot, Target, Apple, Boeing, Johnson & Johnson, MetLife, Best Buy, Safeway, Walt Disney, Coca-Cola, FedEx, Rite-Aid, Macy's, Kohl's, Staples, J.C. Penny, Toys R'Us, Starbucks, GameStop, Visa, AutoZone, OfficeMax, American Family Insurance, Mattel, PetSmart, Hershey's, St. Jude Medical, Big Lots, Con-way, and J.M. Smucker

Yup - she picked those on her own. First thing that jumped out at me, a fair amount of diversity, with weight leaning toward retail and CPG. That's OK, we're not investing in 29 companies.

I then did primary research with her on all 29 companies. I geared it toward a 12 year old. We look at 5 year and 1 year charts and compared against the S&P 500 along with peer companies (like XOM vs CVX as an example). We looked at P/E, compared it to the sector, we looked at trading range, CAPS ranking (stars are easy for a 12 year old to understand), analyst outlook for 2012 and 2013 and in some cases read through some comments.

Her breakdown form the above:

CPG: 4 companies
Energy: 1 company
Telco: 1 company
Retail: 4 companies
Technology: 1 company
Aerospace: 1 company
Entertain: 1 company
Restaurant: 1 company
Finance: 1 company

So - I told her she would need to eliminate two CPG companies, two retailers, and one sector to make it an even 10. Some more research.

THE INVESTMENT:

1) Apple Inc.
2) AutoZone
3) Chevron/Texaco
4) The Walt Disney Company
5) Home Depot Inc
6) Johnson & Johnson
7) Mattel, Inc.
8) Starbucks Corp.
9) Visa Inc.
10) Verizon Communications

Grandma sent her a check she just got today for $100 to buy presents for herself. My daughter has elected to invest 50% of that check - along with the monthly investments.

Not crazy about ShareBuilders fee structure but don't know what else to do (open for suggestions before we get too far down the path). $12 a monnth is going to eat 12% of her monthly investment - certainly going to slow down ROI.

Her investment strategy will be LTBH and we'll revisit every 6 to 12 months (unless the economy dictates otherwise) to see if there are any really big winners or losers.

This is going to help her crunch numbers, read, and think critically. I also hope that it builds a very solid foundation out of the gate that savings is important, and even more important is being an educated investor.

I'm a proud papa bear this afternoon.
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