Taking Stock Advice From 16-Year-Olds
It’s not a good idea. Yet I know a handful of people who take it with grains of sugar.
Mr. Happy is a 16-year-old with a rich dad. He started his ‘investment hustle’ after getting a small loan of $50,000. What happens when you give a 16-year-old $50,000? He ends up making $30,000 returns in a day.
Is it luck? Yes. Does it make this author jealous? Also yes.
I say it’s luck because Mr. Happy makes those returns by placing large sums of his dad’s money into a stock that bets against the S&P 500. This seems like a good short term strategy considering the times we live in but it’s the only stock he seems to know.
He spends his time buying 700 shares of the same stock trying to ‘time the market’. The stock is then sold after it goes up a couple dollars and Mr. Happy ends up making a pretty hefty profit for the day.
Mr. Happy is the type to post, “Make your money work for you instead of you working for your money” on his Instagram stories. It’s ironic because he’s never had to work for his money in the first place and tells others to do the same despite growing up rich.
I’ve also noticed others trying to replicate his strategy, trying to time the market and bet against it. It’s a sad sight to see because none have the capital Mr. Happy carries, so none would make similar returns.
Copying his strategy will only be detrimental in the long run. Not because they’re betting against the market but also because they’re following a 16 year old who doesn’t understand the concept of risk and uncertainty.
What’s worse about the strategy is the risk that comes with it. Mr. Happy invests his returns, doubling down on the same stock.
This particular fund bets against the S&P 500 with a 200% leverage on the volatility moves.
(If the market drops, Mr. Happy makes back double the amount dropped).
(If the market rises, Mr. Happy loses double the amount)
Going all in every blackjack hand is a bad bet. You may get lucky the first couple hands because the dealer busted but for all we know, it’s only a matter of time before they get a blackjack and your bets decline:
The bottom line, Mr. Happy is young with a lot of capital. It’s good that he’s a risk-seeking individual but at the same time he doesn’t understand uncertainty enough to take the risks he does. It’s better to be risk-averse in times like these and invest in quality. Otherwise,
It’s just a matter of time til he becomes Mr. Sad.
