Solid investing insights from kids who won InvestWrite essay contests

By Dian Vujovich

Kids can be wonderful teachers—especially when it comes to how-to make money in the stock market.

As I wrote in my last blog, twice a year the Securities Industry and Financial Markets Association (SIFMA) Foundation conducts an essay writing contest open to all students who play The Stock Market Game in their schools.

Given that the stock markets posted very handsome first quarter gains this year, the S&P was up over 12 percent for instance, anyone who has been around for a while knows that continuing that double-digit upward trend is going to be a tough putt to pull off in each of the remaining three quarters in 2012. I mean, really, four quarters of 12 percent gains each would mean a gain of nearly 50 percent for the S&P this year. Not likely. Particularly given the economic woes here at home and around the globe.

So, in an effort to instill a little investment wisdom into a market filled with uncertainties, lets let the words from a couple of kids –whose essays won them awards in the latest SIFMAs InvestWrite essay contest– guide us going forward.

Thanks to the experience she gained while playing SIFMAs The Stock Market Game, essay contest winner Andrea L., of Spring Brook Elementary School in Naperville, IL, learned that making money in the stock market isn’t easy.

From her essay: “Playing the Stock Market Game taught me that there is no short cut to making money. In order to make a good investment, you really have to do your homework and not rely on what other people are saying or buying. Although paying attention to market trends and analysts is important, fully understanding what a company stands for is the groundwork for a good profit. The Game has encouraged me to create a fantasy portfolio using research based on these principles. I am hoping to be able to invest real money in the future, and hopefully using these skills in order to make a long term investment for college funds or other expenses later in life.”

Palm Spring, FL middle school winner, Isabelle B. from St. Luke School, reminds us that changes of any sort can impact how a stock performs. “No stock is unaffected by changes, ” she writes in her winning essay that examined an investment in The Walt Disney Company.

“If the present Chief Executive Officer (CEO), Mr. Robert Iger, were to leave and be replaced by someone who had very different visions for the future, Disney’s economic future could be hurt. Presently, Mr. Iger’s vision is to generate the best creative content possible, foster innovation and technology, build upon Disney’s rich storytelling, and strive to be the best in customer service. If a new CEO was to have a vision based strictly on present income and not build for the future in innovation and technology, Disney would not be the leaders in robotics and movie graphics. The quality of the parks world-wide and movies would not be the leaders in entertainment. Innovation and leadership would be hurt in a few short years. Technology in these areas grows rapidly. With this change in vision would come less belief in the company and lower stock prices.”

April is Financial Literacy month. Make sure to ask your kid what they know about investing in stocks. What they tell you might make you a fortune.