My son joined the United States Marine Corp about three and a half years ago. It was a good place for him to find confidence and direction. That has happened in spades. Like me, he gets the impulse bug and just wants to dive in and research later. So coming out of the marines he wants to know how to invest. He had to work through the low lying fruit like Navy Federal and USAA. They do have vehicles, but they cannot compete with the big investment house. He mentioned Vanguard as an option that he had and I encouraged him to jump on ot quick. That is a well managed company with great fund managers. That will be money in a Roth IRA that will be a diversified mutual fund more geared to securities versus bonds. More time means more risk tolerant.
Then the next conversation was on day trading. This is where as a kid, he is brilliant, but needs to put the research into it. I asked him to tell me what he knew about day trading because two things happen. One is you are married to the terminal so you can sell at the exact blip that you are looking for. The other is to know that people get crushed in day trading and they look like guys trying to sell their watches in Atlantic City so that they could get back to gambling. Day trading has to have a lot of people at the tail end of the rise.
The direction he wanted to follow was one who did pump and dump with penny stocks. I told him that at its core it is fraud. They get everyone to get in and when they make there money, they get out and everyone else fends for themselves as the stock normalizes on the way down. The problem is that you bought to late into the pump and the drop down has made you upside down. This means you hold a loss on paper for a penny stock that is highly unlikely to go anywhere unless someone tries another pump and dump play.
I sent my son newsletter and tons of support for shorter term plays that all are based on phenomenal accounting and finance rating. Place an order with a trailing 25% sell so if it tanks, your loss is minimized to twenty five percent of your investment.
This is where my son looks more like the young me. He knows what companies are relevant today and he will tinker in and out. he will learn more about the companies overtime and probably get pretty good at reading the tea leaves.
The funny part is I know what I believe, but even after giving free education, it does not change what young blood will actually do. I do feel great that he is in Vanguard, I will take that as a win.