Top stockpickers share their tips for teaching kids how to invest

Many started on their investing journey as teens or even younger, making mistakes early and learning valuable, if painful, lessons.

Stockspot founder Chris Brycki will never forget losing $10,000 as a 15-year-old when his portfolio crashed in the dotcom bust. He built it up from scratch using his pocket money and winnings from the ASX schools sharemarket trading game a couple of years earlier.

“It was a humbling experience,” Mr Brycki said.

“I went from having a bit of a kitty to play with to buy and sell shares, to nothing and having to start again. But I think it’s good to lose money early on, because you realise what you don’t know. It’s like if you go into a casino and you make money the first time: you think you’re a genius, and it probably kicks off a bad gambling habit.

Thirteen-year-old Chris Brycki after winning the ASX Schools Sharemarket Game in 1999. Picture: Virginia Young

“Losing that money made me realise maybe I’m not all that good, and maybe it was just luck that helped me in the first place.”

Like many investors who start trading young, Mr Brycki was exposed to investing through his parents; he grew up watching them manage their self-managed super fund and was fascinated when his dad explained how anyone could own a part of a company by buying its shares.

This is a conversation he now has with his young children, who are four and seven – but with a key difference between the advice he received growing up and what he’s imparting to the next generation.

“When my dad taught me, it was all about picking individual shares, because that was kind of the way to do it, and it was about learning what those businesses do,” he said.

“I would definitely not recommend picking individual shares to my kids, just because it’s unnecessary risk, and really investing and building wealth over the long run is about accessing that compound growth. You only get that by spreading your money and spreading your risk.”

Mr Brycki has built an entire business, Stockspot, around making investing easier for the average person who wants to grow their wealth with ETFs.

Chris Brycki is introducing investing to his kids by showing them they can own a tiny bit of companies they know, such as Disney. Picture: Getty Images

While he may not encourage his kids to buy single stocks, Mr Brycki knows the best way to teach young children about investing is to get on their level.

“They have their Stockspot accounts and we’ve created nice little design icons for the kids accounts where they can see they own a bit of Disney or Netflix or Vegemite-maker Bega,” he said. “That makes it more interesting for them because they interact with some of these companies.”

Stockspot’s minimum investment is $1000 and the kids accounts are popular with parents wanting to buy shares for their very young children as well as helping to educate them about investing as they get older.

The ultimate birthday gift

Star stockpicker and founder of Magellan Financial Hamish Douglass started buying and selling shares at 14 and said investing was a common topic of conversation at home.

“They (Mum and Dad) always talked about it. And I was really interested in business, I was kind of wired like that,” he said.

Once he had his own kids, Mr Douglass came up with a true stockpicker’s gift for the all-important first birthday: Berkshire Hathaway shares.

And on their 18th? He handed over the shares and a stack of reports to go with them.

“I actually did it for education purposes; so they could see a relatively small amount of money when they were young grow into a reasonable amount of money by the time they’re 18,” he said.

“It was so they could see the magic of compounding. And they got the reports, too.”

Magellan Financial co-founder Hamish Douglass. Picture: Britta Campion

All four of his kids have so far resisted the urge to sell, and two of them have developed an appetite for investing – both work in finance.

But the veteran investor, who stepped back from Magellan in 2022, recently issued a grim warning about the impact of artificial intelligence on stocks, saying the technology could send a wrecking ball through sharemarkets in coming years.

He’s nervous for the longer-term outlook of high-end luxury goods brands due to the looming disruption of AI and has called out McDonald’s, Amazon and the like as potentially safer options.

“AI is going to be hugely disruptive, but it’s not going to become apparent for about five years. Working out ahead of the rest of the market which companies will be the winners and the losers is more important today than it’s ever been,” Mr Douglass said.

Valuable lessons in small caps

While Mr Douglass went down the route of safe and steady Berkshire Hathaway for his kids, former JBWere chief investment officer Giselle Roux bought a basket of higher-risk small caps for each of her three sons to introduce them to investing as pre-teens.

This was just post-GFC, and of the five stocks in their portfolios, four quickly went pear-shaped. But she has no regrets about teaching them this lesson early on.

“That’s the nature of the game in smaller companies,” Ms Roux said. “Otherwise you’d end up buying the likes of BHP or CBA and, for a young person, that kind of stock doesn’t hold much purpose; it’s not where they need to be in 40 or 50 years’ time because these are mature companies, and you get enough of that in an index fund.

Giselle Roux was chief investment officer at JBWere when she first bought small caps for her three sons.

“The indexes are so concentrated in big-cap stocks, why would you add another big-cap stock to your portfolio (as a separate investment)? Why not add something that’s more interesting.”

Vanilla ETFs were a great foundation for a portfolio, but riskier, small-cap punting could provide valuable lessons for young investors, she said.

“I actually think it’s quite good for them to take a little bit of risk (and to buy) if they have a company or a theme they’re interested in,” Ms Roux said. “But just make sure it’s a small amount of money in case it doesn’t work out.

“Because, quite frankly, with ETFs you learn nothing more than the way equity market momentum works. You don’t learn about companies, so I do think it’s helpful to have a company or two or three in a portfolio.”

ETFs or single stocks? Why not both?

Woolworths was the first stock TenCap founder Jun Bei Liu bought after moving to Australia from China as a teenager.

“I was working as a checkout chick in high school, and I had never invested here,” Ms Liu said. “I thought the business was incredible; it had a great supply chain and was really well run with the latest technology.”

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With an 11-year-old and a 14-year-old, Ms Liu in the thick of it in terms of getting her kids going on their investing journey. She started introducing them to listed companies three years ago, when her youngest was eight.

“I find the easiest way to teach them is through things they’re familiar with,” she said. “It might be an Apple iPhone or when we go shopping and see a JB Hi-Fi or Chemist Warehouse store.

“So (three years ago) I presented them with a list of companies. We talked about what was driving earnings, how they might grow, etc. They then picked from those names and I set up a portfolio from them.”

Their differing personalities quickly came through in their investing styles, with Ms Liu’s daughter more of a risk-taker compared with her son’s cautious approach.

TenCap founder Jun Bei Liu got her kids investing from a young age. Picture: Nikki Short

“My son, if he looks at a share price that’s already very high, he instantly thinks it’s expensive and he shouldn’t buy it,” she said. “But then I teach them that at times the share price is high because earnings are higher. So for him it’s about learning to take on calculated risk that will get rewarded.

“My daughter’s more of a momentum trader. If something’s going up, she wants to buy it; if something’s going down, she wants to sell it. So I teach her during times of volatility is when you actually need to take quite a long-term view and not panic.”

Like others, Ms Liu sees the benefits of ETFs, particularly when her kids want to buy into certain themes or causes.

“I think kids should have some ETFs and some stocks to form a diversified portfolio,” she said. “They love thematic investing, so getting exposure to climate change and that. They’re very socially conscious, they want to change the world, and ETFs are a great way to invest in thematics.”

This article first appeared in The Australian as Top stockpickers share their tips for teaching kids how to invest