Investment Tips from Young Entrepreneurs
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Martin Thompson, of Englewood, Colorado, and Katie Beeman, of Duluth, Minnesota, have more in common than their age, 22, and earning a wage mowing lawns. At a time when most young adults are tempted to spend all their hard-earned cash buying stuff they want and need, these two entrepreneurs have done something others might find surprising-they've set goals for the future and invested their money toward making those goals a reality.
Smart Man on Campus
Thompson realized at an early age that four years in college would require more than his parents' generosity. To ensure that he could afford the college of his choice, he began mowing lawns and saving birthday money so he could invest in the stock market.
And Thompson's business and financial savvy has paid off. Along with his sister, he purchased stock in a cable company for $19 a share and watched it rise to $42 a share. Thompson also invested in mutual funds, which he felt was a smart way to watch his income grow. "It's easy not to spend [the money] when you have it invested," he says.
Millionaire in the Making
Beeman shares Thompson's interest in the stock market and actually began investing before opening two seasonal businesses, a lawn-mowing service and a Christmas tree lot.
"I would take $20 a month from allowance or babysitting and invest it in the local utility company," Beeman explains. Beeman learned even more about the stock market through a school investment club she joined when she was 12. Participants were given $5,000 in fake money to invest in a stock market game on the computer and worked in small groups to follow their stocks for six months.
At about the same time, Beeman, whose classmates later voted her to their list of Most Likely to be Rich in 10 Years, started mowing lawns because she wanted to make some real dough to invest in some of the game's stocks. Because of her age, she knew lawncare was a business she could easily start. "When you're young, the reality is you have to do what you're capable of doing," she says.
Beeman showed the same ingenuity in running her yardcare business that she did in investing. She soon noticed that homes for sale often sat vacant for months after the owners moved and the lawns became overgrown and unsightly. "I printed a flyer and faxed it to every real estate agent in town," she says. "Soon, several major firms hired me to mow the lawns [of their listed houses]."
For three years, Beeman reinvested part of her earnings in the lawncare business and used the rest to buy stocks. Then, while working at a friend's Christmas tree lot, she discovered another business that was fairly simple for a teen to run. "I decided that if I was going to sit there and man the stand, I might as well be making all the money," she says. That she did, using the proceeds from this business to finance her college education.
Unsure About Investing?
There's really no reason to be, according to these two entrepreneurs, who both began investing in their early teens. They offer the following advice about getting started:
- Research before you invest real money. Start reading business publications such as The Wall Street Journal and talking with other investors. Research possible investments on the Internet, join an investment club or participate in a stock market game.
- Practice discipline. Even if you're not investing yet, get in the habit of setting aside a portion of your income for savings and leave it alone.
- Look for trusted places to invest. Never invest without looking at the performance history of the investment instrument. Decrease your risk by making it a rule to only buy stocks or funds that have shown steady growth for at least five years.
- Decrease risk by diversifying. Don't put all your money in one type of investment or one sector of the market-spread it out.
- Be patient. Beeman's lawn-mowing business started small, but grew so much that she had to hire several employees. "I didn't get 70 lawns the first year of business," she explains. "It took five years, but it paid off." That, she says, is a good analogy for investing in the stock market. Investing is a long-term commitment that will pay off eventually, but it builds gradually.