From stocks to bonds, mutual funds to exchange-traded funds (ETFs), and cryptocurrencies galore, financial investments have grown in popularity in the last few decades, partly due to influence from financial gurus including Warren Buffet, Dave Ramsey, and Robert Kiyosaki. According to an estimate from the Don’t Quit Your Day Job company, 2019 saw over 13 million accredited investors in the U.S., an increase of roughly 35.2% since 2013. With so many active investors and experts raising the awareness of personal finance, it is natural for ordinary people, including high school students, to be intrigued about whether or not they should invest their money.
In early 2020, senior Aaruni Gupta decided to learn about investing and try out paper trading, the use of computer simulation software to simulate the real stock market, he said. Several months later, he began his journey and dived into the real stock market with real money, Gupta said. At first, he took too many risks, and thus, his overall gains were minimal, he said.
“When I was first getting into stocks, I did options without understanding how risky they actually were,” Gupta said. “I didn’t understand how you could lose everything in options within minutes.”
As time went on, Gupta became comfortable with the stock market and his risks went down, he said. Aside from stocks, Aaruni also made one investment in cryptocurrency, though he strongly regretted it, he said. Nonetheless, he still recommends students to invest as soon as they can.
Students should start investing as soon as possible, said longtime investor and social science teacher Michael Cummins. However, students might find it difficult because the U.S. does a poor job of teaching students the financial literacy skills needed to make the right investment decisions, Cummins said.
“Alumni still contact me from time to time wondering why they never learned how to balance a checkbook, do a budget, how to get a credit card, or how to shop for lower interest loans,” Cummins said. “It’s really sort of heartbreaking. As a society, we haven’t done this very well,” he said.
He also sees students that use popular investing apps like Robinhood, that have enticing user interfaces, clicking away at stocks without putting much thought into it, Cummins added.
“Robinhood is fine, except it’s almost like it’s you’re on DraftKings or whatever the other gambling apps are because no one’s really stopping you,” Cummins said. “Humans need friction to make big decisions like this. They need it to be more difficult than that.”
Social science teacher Roy Huang said students who chose to use these platforms must think about the choices they make. Specifically, they must keep in mind how brokerages make money, he said.
Payment for Order Flow (PFOF) is the compensation for a brokerage, a firm that acts as the middleman between buyers and sellers, which works by routing orders for a trade execution to a market maker, according to Investopedia. Oftentimes, PFOF is criticized for taking advantage of investors by seeking to create potentially unfair conditions, such as providing overly and unnecessarily high execution prices for customers, according to Investopedia.
Cummins’ advice for any student who is interested in getting started is to ask a parent to set up a joint account in which both the child and the parent can invest together, he said.
“Start today and then the behavior of cash is actually even more important. Can you, when you have your job at whatever – you’re at Jamba Juice working or Chick-fil-A – when they give you a $100 paycheck, can you put 50 of those dollars somewhere that will help your future?” Cummins said.