Although the return on their investments wasn’t huge, the experience and lessons learned by adults and teen members of the Olney Investment Club proved invaluable, they say.
Linda Silverstein of Brookeville founded the group in January. She said she wanted to help her daughter, Brooke O’Connell, 18, be proficient in investing to build wealth and decided it would be fun to do it as a group with a little competition.
Silverstein reached out through the Olney-Brookeville Exchange Yahoo Group, and O’Connell reached out to her Future Business Leaders of America club at Sherwood High School in Sandy Spring.
Together, they recruited 20 members from the Olney community — 10 adults and 10 teens. Most of the adults wound up being a parent with one or two of their teenagers.
Silverstein also looked for an investment expert willing to educate and coach the club at no charge.
Olney residents Drew Brand and Adriana Colback stepped forward. Brand is a financial adviser with Financial Advantage Associates in Rockville and Colback is a financial adviser with Edward Jones Investments in Olney.
Although they both were a valuable source of information, they did not provide financial advice to the club.
Silverstein created a general partnership for tax purposes and opened a brokerage account for the club with Firstrade, an online discount brokerage.
Each member contributed $100 to the investment account, meaning the adult group and teen group each had $1,000 to invest.
The club met monthly from January through July at Longwood Recreation Center.
Each group evaluated suggested stocks and voted to select the stock they would purchase.
The teens chose to purchase 13 shares of Starbucks stock at $74.49 per share; the adults opted for 103 shares of Gladstone Capital at $9.73 each.
The group learned principles of and strategies for investing such as when to buy, when to sell, benefit versus risk, criteria for picking a stock and how stock prices are calculated.
They also learned the mechanics of investing, such as commission fees, discount brokerages, how to calculate return on investment and learning from the analysts.
At the final meeting, held July 29 in Colback’s office, the club members calculated the return on their investment and sold their stocks at their “sell-abration.”
The teens had gained $45.61 on their initial investment, plus $3.73 in quarterly dividends for a total gain of $49.34.
The adults had gained $24.18, plus $36.05 in monthly dividends, for a total gain of $60.23.
“It was so ironic how close it was,” Silverstein said. “We couldn’t have planned that.”
“The overall result was a gain of $109.22 on a $2,000 investment or approximately 5.5 percent in just six months,” she said. “Since the net return on investment between the groups was so close, the club members decided to distribute the proceeds evenly among the 20 members.”
Each club member received $105.46.
She said the exercise was primarily educational, not to make a killing on the market.
“Although it did gain,” she said. “It may not seem like a lot, but it’s more than if that money was in a bank account.”
Laura Lampshire participated with her sons, Jared, 16, and Nathan, 14.
“It was good to teach them about investing young and how their money will grow over time,” Lampshire said. “Students and young adults don’t learn to do this in school, and I wanted my sons to have a good base.”
She said sometimes the concepts were difficult for the teens to understand, but the experts did a great job of explaining them.
Nathan said he walked in with no knowledge about investments and can now tell if stocks are going to be good, risky or slow-growth and whether they will make money in the long run.
“I learned to buy and sell stocks, so that was a good experience,” he said.
Jared said he learned that you couldn’t assume you will get back what you put it in.
“It’s kind of like gambling,” he said. “But if you invest early and not wait until you are older, it will increase in value.”
Lampshire said she plans to work with both boys to set up online accounts, starting with their $105.46. They will then add money each month and invest with the knowledge they now have.
Colback, the mother of three young children, said she wanted to offer her help because she firmly believes children should learn about investments.
“I think this was a very worthwhile hands-on exercise for everyone,” she said. “For me, I learned that you can’t treat young people as adults. They came in with their own ideas.”
Silverstein said it was sometimes a challenge to teach financial literacy to teens, because it is so difficult for them to see into the future.
“Brooke now wants to open up a Roth IRA and start putting $150 in it each month,” she said. “She saw on a chart how much money she could make in 30 years, but that is a tough concept, knowing that she won’t be able to touch that money.”
Silverstein said she documented the program and would be happy to share it and help other groups who may like to start a similar program. She can be reached at firstname.lastname@example.org.