The safest way to get your kids or teens involved in the world of investing is through index funds. Index funds take your kid’s investment and split it amongst a set of stocks. Have you ever heard of the old saying, “Don’t put all your eggs in one basket"? Index funds take this phrase to heart. They are safer and allow your child’s investment to grow over time. These index funds do not offer a get-rich-quick approach, but they do allow your kids to plan their future goals including university, buying a house, and retiring early!
Passive VS Active Investing
Investing in an index fund is a form of passive investing. This is where an investor doesn’t have to watch their stock daily or time the market to take advantage of profits. When your child invests in an index fund, they don’t have to actively watch the index every day. This is a long-term investment. They can leave their money in there for years and watch it grow. More active investors cannot beat the market's returns, no matter how hard they try. So not only are they stressing themselves out, but they’re also not profiting. That’s why index funds are a good introduction for kids who have enough stress as it is.
What Is the S&P 500 & Why Should Your Child Invest in it?
How would you feel if your child had the opportunity to own a piece of the top 500 companies in America? That is exactly the opportunity the S&P 500 gives your child! The average annual revenue on the S&P is close to 10% over the long term, which is a handsome investment for your children, who are simply letting their money sit in a fund. And over time the S&P has only gone up and up, so you’re setting up your kids for long-term success.
As Warren Buffet mentions time and time again in interviews, never bet against America.
At Explorer Hop, we make index funds and stock fun! In our comprehensive investment program, we offer fun game-based learning activities to introduce the stock market to kids and teens around the world, virtually! For more information, check out our award-winning programs featured on BBC, CBC, and more.