I have teenage boys and I started investing with them when they were 12 years old. So ideally, the best time is when they are teenagers. I am a big believer that those people who have been exposed to investing at early age are going to be much more comfortable with the whole process as adult. So ideally parents start teaching their kids, when they are teenagers. Open up the Custodial Brokerage Account, help them to stocks and mutual funds and let them be a part of the process.
But that's not always the case, because what we found from our studies is that so many adults are not equipped to make sound financial decisions. Their parents didn't talk about it, their schools didn't teach them and so they are not in the position to teach their own kids. So the second best place to start investing, is when you become in the workforce, when you are 22 years old and you work for a corporation that offers a 401(k).
In fact our studies show that's really when people began to learn to invest, but then it's up to the corporation to provide financial education literacy and encourage their employees to take advantage of this retirement vehicle. Because young people have more time to weather the ups and downs of the stock market, they are in a much better position to take on more risk and little more risk, you get a little more reward and that would be a reason to take on more risk, but again it really depends on how much you can stomach-- can you sleep at night, when there are bigger deeps in the market? Because if you do have a bigger percentage of stocks in your portfolio and we have a big down market, that your portfolio is going to react, more so then say if you had less stock and more bonds. But again, over the long term history shows, if you take on a little more risk, you are going to get more return.
But keep in mind, there is a sweet spot where if you take on a little bit too much risk, you are not going to get that much more return, so consider at the very least, I am going to say for a young person in their 20's. I would say and again it's very personal, at least 80% in a diversified stock portfolio for their retirement account or for this account, if they know they are not going to touch and they are going to build upon, over the years, say for the next four year.
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