Ah, the innocence and optimism of youth. Even about financial markets.
Those sunny qualities were on display in an investment strategy essay turned in by fifth grader Kelly Decker of Kansas City, Mo. Her sober and reflective investment plan, aimed at helping pay for her college education, was among the winners in a competition sponsored by the foundation of the securities industry trade group SIFMA.
There’s precious little financial and investment education provided America’s school kids, so cheers for the knowledge spread by the Securities Industry and Financial Markets Association Foundation program. About 20,000 students this year entered the foundation’s essay competitions.
Mutual fund disclaimers tell you past performance is no guarantee of future results, and in Kelly Decker’s investment case, the accuracy of that warning would be plenty helpful. That’s because recent past performance for the sort of long-term, balanced investment plan highlighted in the essay has been anything but encouraging.
The aspiring investor wrote that she plans to take much of hard-won earnings from chores, babysitting and future summer jobs and place them in the U.S. stock market.
Kelly wrote that she has a “low risk tolerance” and a limited investment time frame for college. About 25% of her investments would go to “blue chip” companies, and the rest to mid-cap and large-cap stock mutual funds. As college looms closer, Kelly wrote she will invest in the purported greater safety of bond funds.
As for a simple dose of (admittedly historical) market reality and the fact that long-term investing sometimes really means long term, consider that the Dow Jones Industrial Average continues to flirt with the 10,000 mark, a level it first scaled in 1999.
To meet the student’s goals, she’s counting on an average rate of return of 10% for the stock and mutual fund investments and 5% from the bond funds. The idea is to turn $28,000 into $34,000 to be applied toward a bigger number needed to cover the costs of four years of college at a state university.