My 8-Year-Old's Portfolio Will Kick Your Portfolio's ...

NEW YORK (TheStreet) -- When I graduated high school, I was one month away from turning 18 years old. At that point, I already had my future mapped out for more than a decade. I was going to be the next Howard Stern.

Less than two years out of high school (1995), I moved to Miami and took my first full-time radio gig doing nights on a sports talk station. The next several years of my life looked a lot like the movie Private Parts, minus the lesbians and ultimate smashing success in the radio capital of the world, New York City.

I even dealt with program directors like "Pig Virus." (He's a real person, by the way).

At day's end, I had a moderately successful career, but after about a dozen years on the radio I decided it was not for me. Or maybe radio decided "I wasn't for it."

In any event, before I left home my radio jobs paid by the hour. I think the most I made was $15 per. My summer job at the local housing authority delivered a better wage. In Miami, where they pay you with sunshine, I made a wimpy $26,500 a year. Welcome to the big leagues, kid!

Through it all, I invested in DRIPs (Dividend Reinvestment Plans) and a smattering of mutual funds. As I made more money, I started buying stocks. As I made more money, I bought more stocks.

I became obsessed with the stock market at a relatively young age. I enjoyed more than moderate success investing. I only got my rear end handed to me once -- actually several times. Each time came during the 1999-2000 dot-com boom.

Other than do not chase IPOs, the biggest lessons I learned were:
  • Do not sell right when the power of compounding is about to go to work for you; and
  • Do not sell prematurely because you're getting impatient with a stock.
  • I unloaded 100 shares of McDonald's ( MCD) from a DRIP in 1997 to buy a couch or something stupid. In 2000, I took profits on 500 shares of Petsmart ( PETM) at four-something a share. Don't look up the price. It even hurts me when you do it.

    Fast forward to 2012 and I am an 36-year old man with a kid about to morph into a 9-year-old. Insane.

    I hope when she turns 18 and gains control of the custodial account I set up for her earlier this year, she will not sell out to buy furniture (or "worse"). Knock on wood, but the plan will be to pay for college (and a year off in Europe?) via other means.

    I intend the value of the custodial account as the beginning of her road to wealth and hopefully a life that is, by and large, financially secure. I'll spend the next 10 years doing my best to subtly educate her on the basics and a few not-so-basics (like writing covered calls!) of investing. I'm not going to push, though; that often produces unintended results.

    Ultimately, and maybe most importantly, as Springsteen said,
    If I had one wish for you in this god-forsaken world, kid/It'd be that your mistakes will be your own/That your sins will be your own.

    Yes, I take investing seriously. Because, after all, it can change lives.

    So, in a joint effort, we put my daughter into Kraft ( KFT), Viacom ( VIAB) and The Madison Square Garden Company ( MSG).

    Until the recent weakness, all three stocks performed remarkably well. She's up 1% on the year. But that's really not what's important.

    Theoretically, I hope she takes something away when she peaks over my shoulder to see how her account looks. Practically, I know that it takes time to see results in a relatively small account where you dollar-cost average into dividend-paying growth stocks (only KFT and VIAB pay a dividend for now).

    For 10 years, she cannot touch the money. And, unless we use it expressly for her, neither can I.

    That's one beauty of a custodial account. The money stays under lock and key until your child turns 18 (21 in some states). There are tax advantages (and possible disadvantages) as well. But, most of all, if you're a savvy and not-incredibly-pushy parent you can use it -- and any other investment account really -- to craft a priceless learning experience for your child.

    They'll learn more from a three-minute record than they ever learned in school.

    I intend to update the status of this account periodically on TheStreet. Future articles will include the ins and outs of investing for your children (particularly in custodial accounts), updates on the performance of this portfolio's holdings (it will kick your portfolio's butt!) and some Springsteen lyrics just to keep us grounded.

    I hope you enjoy.

    At the time of publication, the author was long KFT, MSG and VIAB in a custodial account held for his minor child.

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