The ability of Snapchat to go IPO surprised many traditional investors and market commentators. But for most modern investors it has been a classic story of a business built, first, around brand and users and then, looking at revenue. Much like Facebook and Twitter. While the ultimate success/failure of Snapchat is still be seen (and similar companies have seen mixed results, largely), it reconfirms the notion that differentiated tech businesses, built around young people, can be successful. And this has trend has remained the same. So why not encourage young people to invest in these companies as well? We’re not proponents or detractors of the “invest in the companies whose products you use” theory, but more relatable companies certainly tend to attract additional people to the markets.
And for the current teenage populace, Snap Inc. is probably THE emerging company to follow in the stock markets (the likes of Coke, P&G, Apple etc are obviously relevant there too, but they’re not triggers as of now). Almost a quarter of Snapchat’s users were barely in their teens when Facebook IPOed. And, almost 50% of the current Snapchat users didn’t have much of an income when Twitter IPOed. 30% of US teens use Snapchat as their social network of choice. But, hey, we’re still not saying that teens – or anyone – should be buying Snapchat. We are, though, interested in analyzing the positive ramifications of teens taking interest in investing, in general. Here are some:
1. It helps you understand business: Understanding that buying and selling stocks is essentially the act of “investing in a company” is important. This helps comprehend logic of making investments and why companies offer their stock to people and how they use the proceeds to build their businesses and (sometimes) pay dividends to their investors when they make profits. And much of the recent human existence and growth is built around businesses.
2. Practice is the best education: It’s inarguable that business skills and math skills are really handy to have. Aside from the fact that understanding how businesses work develops one’s understanding of life in general, compared to reading from books and writing tests, investing real money (however small) accelerates the rate of learning by a lot.
3. You learn strategy: Now this not apply to the youngest of people, but as you grow older, you need to make more decisions. And decisions require constant thinking between pros and cons, balancing ideas and thinking creatively. This is great for investing from two perspectives – picking stocks and thinking about asset allocation.
4. Losing money makes you stronger: This is probably the least popular reason, but definitely an important one. The sense of ownership that investing brings to you, coupled with the experience of losing now and then helps with all the above points.