Explaining investment topics to a child.

  1. Creating a portfolio…

Author’s note: I’m learning to keep these topics short and simple. My previous article “How to explain quantum physics to a child.” is gaining traction and clarity of how to explain something challenging to a kid. Now, let’s put this into full throttle using finance and investment talk!

What is a portfolio, and how can I create one?

A portfolio is a collection of assets or creations the artist, writer, digital content maker, or investor would use to analyze their creation history. This helps them piece together proper predictions towards certain life changing situations (getting a job, investing in a new business, submitting a thoughtful publication to their favorite company).

If you’re trying to explain a portfolio to a child, it’s rather easy. A portfolio is a collection of valuable or fancy things people want from you. People want quality things. So, in order to show off what you’re good at, you need to collect your favorite works and put it in a safe place, so you can revisit it later and show everyone who you are.

Creating a portfolio…

Okay, log into your favorite social media account, and click the edit button on your profile. Kidding! Please, edit nothing unless you didn’t spell a word correctly.

Creating an investment portfolio requires observation. Remember, this is a collection of valuable assets, so you’ll need to figure out who you are as an investor. Do you enjoy taking risks or play it safe? Below are portfolio types for beginner investors.

  • Showcase/Presentation: Assist with self-marketing, online or traditional branding, and show off how skilled the individual is. These portfolios are excellent to show you’re learning something about the field you’re in.
  • Reflection/Formative: Presenting information beyond the financial performance of their investments. This is great for self-assessment, financial and ethical reflection, and meaningful learning for students and/or beginners.
  • Assessment/Accountability: Focusing on the artifacts aligning with his or her objectives. This portfolio focus on studying stocks and their behaviors, company financial obligations and history, and more!
  • Hybrid: Combining equity and debt; used in two or more portfolios.

Why should children understand investing?

Parents are indirectly teaching their children the basics of investing. When a person invests in a stock or ETF, they’re applying the basics of the basics — risk and/or reward. The person may risk their odds of building capital, or money used by businesses to buy fixed assets (i.e. real estate, machinery, a bag of potato chips). The child could risk their chances of receiving a reward (money, allowance, bonds, stocks, candy). Rewards mostly refer to dividends, a cash reward (profit) given to shareholders.

Intentionally showing the child the ropes can encourage them to apply what they learned in real-world situations. Investing is an unpredictable cause-and-effect. Learning how to transition from a child to a teenager takes time, but not as much time as transitioning from a teenager to a mature adult with a stable income or balanced responsibilities. The child’s learning how to develop a sense of direction while merging the true value of a dollar (or how to make that dollar grow without working 20 jobs).

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