Money Observer’s Prudent Parent mulls a twist on the adage of investing in what you know: how about investing in what your children know?
"Invest in what you know” is the mantra of one of the world’s most successful stockpickers, Peter Lynch. Indeed, over the past decade, it would have been a recipe for success for those who backed the five tech giants (the FAANG stocks) that have become hugely influential over the past decade: Facebook, Amazon, Apple, Netflix and Google (listed under Alphabet, its parent company).
There’s much more to Lynch’s investment philosophy than simply concluding that Gregg’s vegan steak bake is the best thing since, well, Gregg’s vegan sausage roll. The big risk is buying into a piping hot share price that quickly cools down once you’ve splashed your cash, so an assessment of the company’s valuation, among other things, is vital.
Indeed, keeping it simple by investing in businesses whose products and services have enduring appeal with consumers is an approach that has worked successfully for many fund managers.
This got me thinking. In the middle of one sleep-deprived night, I had a eureka moment and coined my own alternative route to riches: invest in what your kids know. After all, kids are the future and all that, so maybe there’s a young company that’s under-appreciated or undiscovered by the market, that I can buy on the cheap. I can then sit back and watch the share price go to the moon.
Unfortunately, though, my two-year-old is not earning his crust in the research department. His main two hobbies are buses and Peppa Pig. Both can be invested in. FirstGroup, for example, carries more than two billion passengers a year on its buses and trains. But I won’t be hopping on for the ride as an investor, as the sector looks structurally challenged with regard to its carbon emissions.
With Peppa Pig, meanwhile, I have missed the boat, as its producer, Entertainment One, was acquired by US board game-maker Hasbro at the end of 2019. A decade ago its share price stood at 25p; it hit 557p when trading was suspended ahead of the acquisition. I await with interest the next fad to grab my son’s attention.
- Prudent Parent is a monthly column that offers money-saving tactics to help invest and save for children and grandchildren.