There isn’t a man out there who doesn’t occasionally wish they could be 22 years old again but know what they know now. I am certainly one of them.
While it is unlikely that a hot tub time machine will be invented anytime soon for you to fulfill this wish, it is not impossible for a son, daughter, niece, nephew, or grandchild who recently graduated from college to achieve exactly this.
A number of subscribers ever grateful for the trading and investment skills I have taught them over the past decade and a half have asked me how they can pass this knowledge on to the next generation.
The answer is very simple. Set up a trading account in your child’s name and fund it with $10,000. Then buy them a one-year subscription to the Diary of a Mad Hedge Fund Trader.
Tell them that they get to keep any trading profits they generate. They can repay the original capital when they have the money to do so some time in the future.
If they lose all the money, they get nothing more and the both of you have learned a valuable life lesson.
This happens to be how many Wall Street veterans and hedge fund managers teach their own kids how to trade. It is also how many major hedge fund managers started out. Nothing beats learning by doing.
Having watched followers do this for 13 years, the stories that come back are nothing less than amazing. Some kids literally take to trading like a fish to water. They come up with trading ideas that are SO good that even I, a 50-year veteran, haven’t dreamed them up yet.
I have also seen the opposite extreme. Some nascent traders put all their money into a single ill-conceived trade and blow all the money in a matter of weeks (so you bought oil and the beginning of the Gulf War, not during the build-up?). They get discouraged and never trade again.
There is a good rule of thumb to follow here. The longer the student traders read the Diary of a Mad Hedge Fund Trader before committing to their first real money trade, the greater the likelihood of making an initial profit. Those who wait a year and paper trade with “play money” until then can be reliably expected to match or exceed my own 50%-60% annual returns.
If successful, the lessons learned are legion. They learn responsibility and how to accept the consequences of their own actions. There is NO arguing with a closing mark to market P&L in your trading account. Accounting is a cruel taskmaster.
They also come to understand risk management, information flows, risk/reward, and the value of time spent on deep research. If they get drawn in to reading books about trading or options, so much the better. This is incredibly valuable information to have not only in investment, but in any future business activity they may engage in.
Buy a child a fish and you feed him for a day. Teach him to fish and you feed him for life. This is a way to teach your young relatives how to fish so you can get yourself out of the fish-buying business.
The sooner you get kids out of the nest, the better.
Sometimes It Helps to Have Some Big Guns Behind You