Most teens are thinking about how to stretch their money until next payday. Jack Alexander is focused on a plan for his money come 2051.
The 18-year-old from Plymouth placed first in a national essay contest that asked him how he would invest $100,000 if he were about to embark on a 40-year space mission.
It's not a question many teens could answer. But Alexander, whose love for the stock market started when his dad opened a brokerage account with him when he was 11, knew just what to do.
He learned about selecting mutual funds and reading stock charts in his investing class at Wayzata High School in Plymouth. The course, taught by business teacher Candace Lee, is an elective at the school of about 3,330 students. Just 20 students per year choose to take the class, which includes playing the Stock Market Game.
Jack selected three investments for his portfolio, which he researched online. Some of his favorite sites are Morningstar.com, Yahoo Finance, and Seekingalpha.com. First, he put $40,000 in the T. Rowe Price Retirement 2055 fund (TRRNX), a lifecycle fund that invests in a mix of stocks and bonds that shifts from riskier to more conservative as the maturity date nears.
"The fund has no load and an expense ratio of only .77 percent -- both very important factors when investing long term as it can have a huge effect on profit," he explained in his essay.
He also picked this type of fund because it is well diversified. Having a diversified base gives him room to invest the rest of his money in exchange-traded funds that invest in the metals lithium and palladium. He picked exchange-traded funds, which are essentially index funds that trade like stocks, because they typically have lower expenses than mutual funds.
Why the ETFS Physical Palladium Shares (ticker: PALL)? Because palladium is used in catalytic converters for autos. "I was thinking in Third World countries there's going to be huge increase in demand for cars," he said.