Investing From the Cradle to the Grave

NEW YORK (TheStreet) -- It's the American way to grow up striving for a good education so you can have a successful career and a happy and prosperous family life. Along the way, investing and wealth preservation should be considered a necessity.

We can all learn from the "E-Trade Baby" of the commercial, who shows us how easy it is to invest in the stock market. He clearly shows how important it is for new parents to focus not only on their own investments and wealth management, but also give their children a head start in an economic environment that will always appear promising but will likely remain challenging.

As a stock market strategist I cannot give tax advice, but I know there are investment products that will give your children or grandchildren a head start and can be made with pretax dollars. Some products provide life insurance, funding for a college education and can become a starter retirement account to benefit the child.

In one strategy, parents can buy their children Indexed Universal Life insurance policies and overfund them. The extra cash value will built over the years and can be used for college expenses or provides a starter retirement account.

When do you talk stocks with your children? You can start by mentioning a stock by name when you dine at an eatery that is owned by a publicly traded company.

For example, you can explain that YUM! Brands ( YUM), which closed Thursday at $69.84, owns three different fast food chains: Kentucky Fried Chicken, Pizza Hut and Taco Bell. Eventually, your children may want to know that the stock has a buy rating according to ValuEngine, but is 18.2% overvalued. You can tell them the stock tested and held its 200-day simple moving average at $68.88 on Wednesday. You can explain that you used a GTC limit order to buy weakness to that moving average in you self directed IRA account. You can also explain that you have a GTC limit order to sell strength to a semiannual risky level at $79.28.

Once your children are in high school, you should advise them to join a school investment club if offered as an elective.

Children selecting a college should consider a school that offers courses covering the global economy and the financial markets.

I live and work just north of Tampa, Fla. Early this year I was introduced to the dean of the business school at the University of Tampa. In late April I gave a presentation to the UT investment club and about 80 undergraduate students on "Investing in the US Capital Markets." I explained how to combine fundamental analysis and technical analysis in building and managing an investment portfolio. I have been invited to present again this fall term.

At UT the graduate students have their own trading room and manage a portfolio, funded by alumni. One of their holdings is Apple ( AAPL), which closed Thursday at $495.27. At my presentation in late April, I thought the stock had set a bottom at $385.10 on April 22. I stated the stock had a buy rating and was undervalued and shifted from a momentum stock to a value stock. Today, the stock is back above its 200-day simple moving average at $464.82, but now has a hold rating and is 9.6% overvalued. My annual pivots at $421.05 and $510.64 have provided a near-term trading range.

Clearly these students will be well prepared to start a family, build a career and try to stay healthy and grow then manage their own wealth.

Assuming you successfully built wealth using equity investments, you should make some serious decisions about preserving wealth as you approach age 65. This is an issue that baby-boomers are beginning to face. You want to limit losses and lock in gains. You can simply raise cash to 50% on your portfolio holdings, or you can consider shifting some assets into annuities and other life insurance products.

I will not get into the details of these products but an annuity can be set up to take advantage of a portion of a rise in the stock market, while protecting your assets on the downside.

If you want protection that includes long-term care, such can be funded via an annuity and protect other assets from the costs of long term care.

The good way to invest in an annuity would be to rollover money that's in bank CDs into a fixed indexed-based annuity. This investment product is basically an indexed universal life insurance policy but has slow growth due to market participation ratios.

If you have 401(k)s or IRAs, you can consider life insurance and annuities as some structures are available that avoid probate when you pass on to the grave.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.

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