3 Basic Investment Strategies Kids Should Know

Step Up Your Kid's Investment Game

Updated March 25, 2023

When it comes to investing, it’s important that kids have a handle on the investing basics. Stocks, bonds, and even an introduction to ETFs and mutual funds helps your child build financial literacy skills. Once they’ve got the basics down, its time to get your child to step up their investment game. Get them flexing those financial muscles!

3 Investment Strategies for Kids

Beyond common asset classes, kids should know that there are three basic investment strategies that have proven their worth, time and again.

1 Portfolio diversification

When it comes to investing, the key is not to put all of your eggs in one basket, so to speak. By having a diverse and well-rounded portfolio, investors are typically better protected against downside risk. While a diverse portfolio might not make investors a quick buck, over time it helps ensure more consistent returns.

Stretching beyond stocks, bonds, ETFs and mutual funds, a portfolio could also include alternative asset classes like commodities (soybeans, oil, gold, etc.), real estate, international equities, crypto, art or even sports memorabilia.

It’s important to note that if you have a diverse portfolio, there may be years when your personal portfolio under performs the S&P. But don’t be discouraged because a diverse portfolio will help buffer from outsized, downside risk.

2 Long-term investing

Your child, as a young investor, should be ready to invest for the long haul. Invested money should not be funds needed in the short term, but rather money put to work for the future. While today’s TikTokers are flipping their meme-stocks by the hour, young investors should also remember that there is a great deal of value in investing for the long term.

When kids start investing early, they see firsthand how the power of compounding interest and longevity in the market can pay off in meaningful ways.

3 Rebalance your portfolio

Investors new and old should understand the importance of rebalancing an investment portfolio as needed.

Market volatility and returns can impact allocations over time. When combined with shifts in trends or values, rebalancing becomes critical to a healthy portfolio.

Portfolio asset allocation should reflect both overall time horizon, as well as investing values (such as a focus on ESG, etc).

 Besides stocks and bonds, what other assets could you invest in to make your portfolio more diverse?