What is Long Term Investing: A Simple Explanation for Kids, Teens & Beginners

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Introduction to Long Term Investing for Kids and Teens

This video explains the concept of long term investing in a simple, concise way for kids and beginners. It could be used by kids & teens to learn about buy & hold investing, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.

Suitable for students from grade levels:

• Kindergarten
• Elementary School
• Middle School
• High School

The topics covered are:

• What is long term investing
• When should you adopt the strategy of long term investing
• What are the advantages of long-term investing
• What should I invest in for the long term
• If I practice long term investing, what should I keep in mind

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What is long term investing?

Long term investing, also known as buy-and-hold investing, is a passive investment strategy where you buy an asset and hold it for a long time before selling, with the intent of maximizing your returns over the long term.

How long ‘long term’ is varies depending on the type of investment – but it is usually at least 5 years.

Legendary investor Warren Buffett is a huge proponent of buy-and-hold investing.

When does long term investing make sense? When should you adopt this strategy?

Long term investing makes sense if you are investing for something that’s far into the future – like investing for your retirement when you’re still in your 20s or investing for your child’s college education when she is just starting elementary school.

What are the advantages of long term investing?

The main advantage of long term investing is that it gives much better returns, on average, over the long term. And the compounding effect that a long time frame has is just the cherry on the cake!

Also, it is very simple to implement, as you don’t need to constantly buy and sell – so it’s less work. It also has cost advantages in terms of lower commission and brokerage fee.

Long term investing also has great tax benefits – it not only automatically defers capital gains tax until the investments are sold, but the gains are taxed at a much lower rate than short term gains.

What should I invest in for the long term?

Investing in the stock market is ideal for the long term – although it is high risk in the near term, you can handle fluctuations in the stock market with a long investment horizon.

If you are a seasoned investor and know how to pick individual stocks, you can invest in value stocks, or blue chip stocks that thrive in bull markets and survive bear markets. For long term investors just starting out, a good investment choice is an index fund that tracks a broad-based index like the S&P 500.

However, as you approach your goal, you should shift your investments to something more conservative and low-risk – like a corporate or government bond, or a certificate of deposit.

If I practice long term investing, what should I keep in mind?

First of all, you have to be patient and disciplined. You need to take the emotion out of investing – you cannot sell investments impulsively, because this strategy only works if you hold your investments for a long period of time.

Long term investing is also not very exciting. Since you are not constantly buying and selling investments trying to time the market, it might not be as ‘fun’ or exciting as day trading or some other investment strategies.

But investing is about getting good returns – and this strategy virtually guarantees that.

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Download Transcript: Ideal for Use by Teachers in their Lesson Plan to Teach Kids & Teens

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Podcast: What is Long-Term Investing