One on One with Tim Olsen, author of "The Teenage Investor"
Thursday, November 23, 2006
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PAUL KANGAS: Investing is a skill many parents and grandparents would like to teach their kids and grandkids. My guest has a few thoughts on getting your kids excited about investing and he's a kid himself. Joining me now is Tim Olsen, author of "The Teenage Investor." Tim, welcome to NIGHTLY BUSINESS REPORT.
TIMOTHY OLSEN, AUTHOR, THE TEENAGE INVESTOR: Thank you for having me, Paul.
KANGAS: I understand your book, which you wrote at aged 13, is now back out in paper back and now you're 17 years of age. Does that make you a seasoned investor?
OLSEN: I don't know if you'd call it season but I've had my years of experience.
KANGAS: That's good enough. Tell me how you got started. What sparked your interest in investing?
OLSEN: My parents, they wanted me to start in investing. They wanted me to save my money and invest it for the future. And I was only eight years old at the time when they urged me to buy my first stock in a company I liked and that company was Pepsico.
KANGAS: Well I know the first thing you say about investing is that you have to start by saving money. In your book you call it the wealth plan for young investors and it's all about savings and the beauty of compound interest. Tell me more about that.
OLSEN: Well, it's really important for kids at any age, as young as possible, to open up a savings account or open up a CD. If they can put away money for a couple years and especially with interest rates on the rise right now, it's important for kids to put in savings accounts and have the interest compounded upon the interest they're already getting.
KANGAS: And moving on from the basics of saving and compound interest which is great over the long run, to the financial markets, how does a kid go about making his first stock investment?
OLSEN: Well, I always urge kids to buy stocks in stable, solid growth companies. Traditionally I would pick stocks in the Dow Jones Industrial Average, 30 companies that most represent American business. And I think it's important to pick stocks that have solid dividends. Nowadays, you don't know where the market is going and you don't know in general in the future, so the best way to invest for a kid who's just starting out is to buy stock in a company that pays a solid dividend, a yield of perhaps 3 to 5 percent and just reinvest those dividends.
KANGAS: So you're big on doing your own research. Why is that?
OLSEN: Well, you really can't trust a lot of things on Wall Street these days and one of the most important things is to keep an eye out for yourself because you're the only person who has the best interest of yourself at heart.
KANGAS: Let's talk about the basics. First of all, you believe in setting a goal. How do you do that?
OLSEN: Well, whatever age you're at. I'm 17 years old right now and I would just start out writing down your goals, writing down what you want to do in the future. And if that involves going to college in a couple years, then you write that down. Then you're going to want to write down what type of financial commitment that's going to take. And if that financial commitment is something that you can accomplish in five to 10 years when you want to pay off college if you have loans or what not, then you're going to be wanting to invest in something that's going to earn you a solid return over that time period.
KANGAS: OK. So the timeline is very important to you. You have to set a goal over a certain time frame, correct?
OLSEN: Absolutely. The time period you set is going to really determine what type of stocks or what type of investments you're going to be making. And whether that involves a savings account for a relatively shorter term investment or a solid growth company for a long long-term stock investment, then you're going to want to see how long you're going to be able to be invested in them.
KANGAS: Tim, before we wrap up, you'll soon graduate from high school. Are you planning a career on Wall Street?
OLSEN: It's something I definitely want to pursue. I either want to be in the mutual fund management business or the private equity business.
KANGAS: Very good. Well, I'm afraid our time has run out, but it was a pleasure meeting you, Tim and you're a smart young guy and I wish you continued success in investing and educating new investors.
OLSEN: Thanks a lot, Paul. It's great to be here.
KANGAS: My guest, Tim Olsen, author of "The Teenage Investor."
