Rolling the Dice on Youth Investment

Covered in sweat. You haven’t slept in 20 hours. Thirty men in suits are around you, all with their heads 2 inches from a Bloomberg Terminal while your severe carpal tunnel begins to flare up. Welcome to the ‘80s — where this is the cost of making it big at Berkshire Hathaway.

Flash-forward to 2023, and there are no more Bloomberg machines. Instead there’s a 17 year old kid pulling up an app on his phone, placed right next to Snapchat and Clash of Clans. He’s putting a grand in GME call options which will be valued at about sixty-three cents in six hours. The future is now and the wave of technological advancement has swallowed everything in its path, and investing is no exception.

Digitalization is becoming increasingly apparent in the modern world and this applies to all age groups. 88% of teens aged 13-18 own a smartphone and thus are given access to an arsenal of online tools. Just one of these tools that’s appeared in these kids’ pockets is that of investing. Now, a process that once had 10 roadblocks for minors has none. After a one day approval process, your investing account will be up and running. This ease of access makes life a lot simpler, but the question is, are these students prepared to enter into these real markets, and furthermore, if not, how can we as a society better prepare these students for investing? 

We don’t want to provide the wrong impression. This isn’t some wild fad the youth are adopting in masses like they did with fidget spinners and LED lights. It’s more so a small niche that’s developing slowly but surely. Interestingly enough, this has really gained particular prominence after the Covid-19 Pandemic. According to Business Insider, during the height of The Pandemic outbreak, the investment platform Robinhood opened roughly 3 million new accounts on its platform. 

This has trickled down to our community as well. Just in an SRHS survey of 50 students, we found 32% were in some way invested in stocks and 53% plan on it in the near future. At least locally, there’s an interest in being involved with the markets, and students are beginning to make an effort to act on that.

Carl Fassberg is an 18 year old senior at SRHS. He’s your typical high school student who works a part time job at a Mediterranean restaurant and spends his free time tinkering with cars. Over the last couple years though, Fassberg found a new hobby in retail investing. 

After mindlessly clicking through his YouTube recommendations during quarantine, he discovered an interesting investing account and felt inspired to invest himself. After discussing it with his parents, he created a Charles Schwab account under their name. 

“At the beginning, I wanted to invest a lot into individual stocks… there’s more excitement,” remarked Fassberg, reminiscing on his first months of investing. And it’s true, investing into those volatile stocks can seem enticing in a world of slow markets. But with a higher chance for profit there comes a higher chance for loss. 

As Fassberg has matured, his investment strategy has followed suit. “Lately I have been doing a lot more total market share, mutual funds and ETFs.” This is the safe stuff, big collections of stocks that aren’t as subject to huge fluctuations like the individual stocks. Here, instead of betting that a single company will succeed, you’re betting a whole industry will grow, or even an entire economy. 

Fassberg isn’t alone in his endeavors. During quarantine, another senior at SRHS, Jeremi Nuer, began his own investing journey. This began with some videos on just a single company.  “I saw one video about Tesla, then I saw another, and then I just fell down a rabbit hole,” Nuer remarked. He didn’t think of it so much as a way of making money but rather being a part of something quite remarkable, and bigger than himself. Nuer put it this way: “Tesla’s a company that’s heading our future, and that’s something I want to be involved in.”

Despite it not being his main focus, Nuer ended up striking gold. Shortly after he invested, Tesla exploded. “I remember sitting on the couch and watching the number go up by hundreds,” he explained. “It was a massive dopamine hit, and I was hooked.” Since this initial boom in Nuer’s portfolio, he’s continued to follow the market and remain invested. For the most part though, he’s stayed away from the new investment platforms and used his dad’s account as his primary bridge into the market. 

Fassberg and Nuer have both been investing for some time now. For some insight with a new investor, we spoke with Zane Rose, who had only opened up his account as of a couple days ago. He had signed up with Robinhood for the free $5 stock bonus. That was enough to encourage him to throw $30 at Amazon. 

Rose hadn’t done any research prior to investing in Amazon. At the time, He was in the SRHS economics class though he claimed it had no bearing on his investing decision. He said he didn’t use any of the knowledge he had learned from that class when deciding how to invest. Instead, he felt compelled to invest in order to pull in those “big bucks.”

Investing isn’t some gimmick to lose your money and waste your time (that’s crypto), it’s an important life skill that shouldn’t be disregarded. As this trend of younger investors continues, it’s becoming increasingly more important that students have bearing on what they’re doing. So what’s the primary institution that students go to in order to learn a new subject? I’ll give you a moment. If you guessed school, you don’t get anything, but I’ll send you a virtual high five over your computer screen. 

Mrs. Ayoob, an Economics teacher at SRHS, has taken note of this budding trend. “There is a definite uptick in students getting into investing,” she explained. While she is observing this increase in teen investors, the school is lacking in the infrastructure to support these students’ interests.

“In reality we are given a single unit to cover personal finance in a semester course,” Ayoob elaborated, “it’s impossible to do such an incredibly important unit well in the given time.” While Mrs. Ayoob tries to do the best with the time allotted to her, the simple truth is there’s just too much to teach and not enough time. 

In her nine years of experience at SRHS, Mrs. Ayoob has made an effort to fix the issue a couple times. In fact, just a couple years ago, she and Ms. Spaelti(another economics teacher at SRHS) tried to create a semester-long personal financial literacy course. Even with their seniority at the school, they still ended up facing too many roadblocks to give the project legs; the main issue being that the school follows a statewide curriculum. The bureaucracy just makes the project impossible.

When we mentioned the concept of this semester-long finance class, Fassberg’s face immediately lit up. He loved the idea and went as far as to say that if it were available, he would have signed up without a second thought. Fassberg wasn’t the only student who thought the class was a great idea. Every student we spoke with said that if given the chance, they would take an investing-focused class. 

Without rigid classes, or anything else for that matter, it’s not the school introducing students to the world of investing, but rather the internet. YouTube will suggest the topic before your teacher does. This is a process many go through when being introduced to new hobbies, it just happens that in this case, that hobby is investing with real money and not basket weaving.

This is the way both Fassberg and Nuer were introduced to the topic of investing. Well-informed sources on YouTube like Graham Stephan and Dave Ramsey provided their foundations. While these fantastic resources are all accessible online, the flip side is that you can just as easily stumble across some less constructive resources. This contrast is epitomized in the world of r/wallstreetbets(r/WSB). 

Have you ever scrolled through Reddit? It’s a website where strangers will answer your questions on any topic and where you can follow current events pretty easily. Within Reddit, there’s sub communities called subreddits, where people post about specific niches and topics. One of the largest subreddits is the 13.9 million member r/wallstreetbets(r/WSB). An odd but apt name as you’ll come to see. The descriptor reads as such: “Like 4chan found a Bloomberg terminal.” 

As with most subreddits, r/wallstreetbets serves as a sort of youth hub. Most of the members are in their early twenties or late teens. This makes it a nexus point for people to discuss investing with those in similar mindsets. 

The subreddit gained infamy for facilitating the GME and AMC short squeeze of 2021. Basically, this group “gamed” the stock market and collectively waged a sort of war against traditional investment firms. In the end, nothing really changed, however, it did bring a lot of new investors into the fold with the amount of attention they attracted. This was during the peak of Covid and likely contributed to the rising amount of new investors downloading platforms like Robinhood as referenced earlier.

A simple scroll through the subreddit reveals the type of content this young demographic outputs. It seems to be about one half are text image memes, one fourth are serious discussion posts and another fourth are absurd gains or losses often referred to as YOLOs.

YOLO’s, as in “You Only Live Once,” are basically posts of people spending absurd amounts of money on incredibly risky investments. Oftentimes, these people are funding these investments with margin (super-high interest capital loans) or college loans.

This doesn’t paint r/wallstreetbets in the best light, but that’s not to say it’s worthless as a resource to investors. A moderator of r/wallstreetbets who goes by the screen name OIPisPopular spoke on how there is a team of dedicated investors behind the scenes that work with long term strategies in mind. “What a lot of people don’t know is that there are parts of WSB dedicated to discussing much more boring and long term trades.” But that sort of reputation gets overshadowed by viral videos of members losing truly absurd amounts. At a surface level, r/wallstreetbets comes off as comedic in its stupidity, but when engrossing yourself in the community, you can find some real value. 

A longer look at the subreddit reveals a surprisingly more insightful core. “While the advice is questionable, people are honest,” explained OIPisPopular. He went on to explain that most on the platform are fairly educated. “Wallstreetbets users are far more competent at investing than the average person… I would put the average level of education around a second or third year student studying finance.” 

Without knowing about investing strategy, it’s easy for amateur investors to get involved with these high risk investments like stock options. In a grossly oversimplified explanation, stock options are basically extremely volatile investments where you bet the price of a stock will increase by a specific date. If you think that individual stocks are volatile, these are like that but times ten. Without the proper understanding and research, options are more similar to sports betting than long-term investments.

The wild upside of these options have caught the attention of one senior at SRHS, Max Brode, who once engaged in this options market while in quarantine. He wanted to begin investing after the Gamestop craze but was never introduced to any sort of real strategy. As such, his investment strategy never developed a strong foundation. 

Brode started investing off with individual companies, one being Cinemark(CNK). When we spoke with Brode he told us that he never felt the need to do any real research prior to his investment. He told us his strategy is primarily based on “gut feeling.”

He said he found the idea of investing interesting and wanted to take part in the market. But instead of seeing his investments as a piece of a supply-demand market, it was more of a magic money printer.

Soon, the thrill of stocks began to fade for Brode, and he moved onto something more exhilarating. “My brokerage made it really easy to jump from stocks to calls (a form of options).” So, in 2021, he gave it a shot with Cinemark and a Silver ETF call option. With such high risk investments, every trading day was a chance to double it or lose it all. “Checking the market in the morning felt really thrilling, it was like my completely heart sank and rose again, all in like, five seconds.” All of these calls ended up sinking down to the grand total of zero dollars.

With the trend of increased interest in investing, schools need to be prepared to educate students. Brode is an example of a student who went down the path of a hopeful investor with limited knowledge, only to be set on a path of decline. So with the school lacking the infrastructure to support these students’ interest and online sources are hit or miss, where else can students turn to learn about investing?

Well, one other tool of investment many use is a financial manager. This is the classic route for investors and the one which Nuer took before investing. With this, you have a real person to consult with that can do the heavy lifting and nitty gritty of investing. 

Kirk Ludwig works as a financial manager at his own firm, WestHill Financial Advisors Inc., based out of San Rafael. His job is to work with clients to best manage their money. A part of this is to manage clients’ investing portfolio to best prepare them financially for the future. 

A financial advisor seems to check all the boxes for young investors. It gives one to one insight, it provides an accurate and experienced perspective, it’s personalized, can get you invested early and even reduces some of the stress of investing on your own. There’s just one small problem, most won’t even consider you if you don’t put at least six figures. You’ll be hard pressed to find a student with $10,000 in general, much less $100,000 available for investment . 

Ludwig explained that financial firms aim to deal with clients who are “in the prime or peak earning years,” or around the age of 50-60. Students are just entering their earning years and have hardly reached their peak. So it seems this resource is reserved for Baby Boomers and the wealthy. 

Ludwig said he would refer any young adult to the Fidelity or Schwab trading websites to get started with investing. So, in fewer words: Kids, tough luck, you’re on your own. That is, unless your parents provide a gateway to this resource.

When Jeremi Nuer took a keen interest in Tesla, he didn’t just open up an account and start investing. He did some heavy research, spoke with his parents and then they gave him access to their personal investment manager. After a couple consultations where he explained his line of reasoning on the stock, the manager got him all set up and invested. 

This is an opportunity the vast majority of students won’t have access to for at least twenty years. But financially savvy parents can set their children up early. This doesn’t just develop investing skills early, it gives these children a huge advantage in the long-term as profile growth increases exponentially.

For example, if you invested a hundred dollars in the S&P 500 twenty years ago, you would have $445.63 now. On the other hand, if you had invested in that same index fund forty years ago, you would have a whopping $2,564.92 now. That’s over a five times difference in just twice the time.

Ms. Verheecke, an Economics teacher at SHRS, said she’s also noticed this pattern in economic literacy. “Personal finance knowledge is something that tends to be passed down through families,” she explained.

This creates what’s often referred to as “generational wealth”. When a family gets wealthy, they can teach valuable lessons on finance to their children and then use their assets to prop up their own childrens’ success and prosperity. This is anti-class mobility. With this mentality being taught by the wealthy, the flip side goes for the impoverished of America. 

There’s three factors that go into this. One, when your parents are often away at work to pay the rent, they don’t have as much time to be with you and thus teach valuable lessons. The second factor is that because they never financially succeeded, they can’t teach you lessons from their experience of amassing wealth. The last factor is that if you’re struggling to get by, you can’t provide your children with the resources to succeed financially. You can’t afford a tutor, a private school and most certainly not a financial manager. 

This is where public schools come in. They’re the great equalizer where poor and rich alike can mingle and learn under a shared roof. But you can only learn from what’s offered. And what’s not offered is a financial literacy program, and without that, the system continues to perpetuate a process of class immobility.

But the future is optimistic, the system has begun to change. Recently, a new bill has been proposed in California. The bill, Assembly Bill 984, would require California schools to offer financial literacy courses by the 2025-26 school year and have those in it graduate by 2029 or later.  

But until this bill and more like it pass, Fassberg, Nuer, Rose, Brode and any other high schooler looking to invest will have to enter the crapshoot on their own. Still, even without support, students entering this world will be learning more and more everyday as they enter the markets. And, as OIPisPopular explains, “people should take risks as early as possible and learn from them. The stakes are lower, and they have far more time to recover, even if young users lose money to start, they’ll gain invaluable experience they couldn’t gain anywhere else.”